Gold as a Strategic Asset for Investors

Gold has long been considered a valuable and strategic asset, particularly for investors looking to diversify their portfolios and protect their wealth. In this article, we'll explore what makes gold appealing as an investment, how it performs over the long-term, and key considerations for investors.

What Makes Gold a Strategic Asset?

Gold has several key attributes that make it an attractive addition to investment portfolios:

• Long history as a store of value: For centuries, gold has been used as a means of preserving and transferring wealth. Unlike fiat currencies, gold cannot be printed and has maintained its purchasing power over time.
• Dual nature as investment and consumer good: Gold derives demand from both investors looking to protect and grow wealth, as well as consumers who purchase gold jewelry and use gold in technology. This helps support gold's value.
• Performs well in various economic conditions: Gold has delivered positive returns in both good and bad economic times. Its price often rises during periods of economic uncertainty as investors seek safe-havens, while consumer demand supports its performance during expansions.
• Effective portfolio diversifier: Gold has a low or negative correlation with many other assets like stocks and bonds. This means it can help reduce overall portfolio volatility and downside risk.
• Highly liquid asset: The gold market is large and highly liquid, with substantial trading volumes that dwarf many other asset classes. This allows investors to efficiently buy or sell positions.

Gold's Long-term Performance

Gold has an impressive long-term track record, delivering an annualized return of 8% in US dollars since 1971 when the gold standard collapsed. Over the past 10, 20 and 50 years, gold has outperformed many major asset classes.

Some key performance attributes of gold:

• Hedge against inflation: Gold has preserved purchasing power, rising more than the rate of inflation over the long-term. In high inflation years, gold's price appreciation accelerates.
• Performs in deflationary periods: Gold also does well in periods of deflation characterized by low interest rates and financial stress, which foster demand.
• Currency hedge: Gold has significantly outperformed all major fiat currencies over time as a store of value. As central banks print money, gold tends to appreciate.
• Delivers when it matters: During systemic risk events like the Global Financial Crisis, gold has generated strong positive returns while other assets tumbled. It also rebounds well in the recoveries that follow major equity selloffs.

Diversification Benefits of Gold

One of gold's most powerful attributes as an investment is its ability to effectively diversify portfolios. This diversification benefit arises from gold's unique relationship with other assets, particularly equities. In a typical portfolio, many assets like stocks and corporate bonds tend to become more correlated with each other during market downturns. This means they fall together, undermining the protection investors expect from diversification.

Gold, however, exhibits a different pattern. It has a low or even negative correlation with most other investments, especially during times of market stress. In fact, gold's correlation with equities becomes increasingly negative as stocks sell off. This means that gold often moves in the opposite direction of the stock market, rising in value when equities are falling. This powerful diversification benefit manifests when investors need it the most – during major market downturns that can seriously impact portfolio value.

Interestingly, gold's hedging abilities are not limited to crisis periods. Because gold serves as both an investment asset and a consumer good, it can also deliver positive returns during economic expansions. As incomes rise and consumers spend more on jewellery and technology, gold demand often increases. This dual nature means gold can have a positive correlation with other risk assets during bull markets. The result is that gold can provide valuable diversification across a range of economic conditions, not just during bouts of market turmoil.

Gold's Deep & Liquid Market

The gold market is one of the largest and most liquid in the world, which is important for large institutional investors. Gold's liquidity comes from several sources:

• Physical gold holdings by investors and central banks, worth over $5 trillion
• $1 trillion in open interest in gold derivatives on exchanges and over-the-counter
• Physical gold ETFs trade over $2 billion per day on average

Gold's daily trading volume averaged $163 billion per day in 2023, with the over-the-counter market accounting for $99 billion. This liquidity holds up even during times of financial stress.

Evaluating Gold's Risk/Reward Profile

The combination of gold's long-term returns, liquidity, and diversification benefits can significantly enhance a portfolio's risk-adjusted performance. Analysis shows that portfolios with a 2% to 10% allocation to gold achieved higher risk-adjusted returns over the past 1, 5, 10 and 20 years.

For example, a hypothetical portfolio with 60% stocks and 40% bonds over the past 20 years had a Sharpe ratio of 0.64. Adding a 5% allocation to gold boosted that risk-adjusted return by 3.5%. The benefits were even larger for portfolios with a higher risk profile.

Importantly, even a small allocation to gold can make a big difference:

• Reduces maximum drawdowns
• Increases portfolio efficiency by offering higher returns for the same level of risk
• Allows investors to target a higher return for a given risk tolerance

The optimal amount of gold for a portfolio varies based on an investor's risk tolerance and portfolio mix. In general, the higher the risk of the portfolio and the lower the allocation to other diversifiers, the larger the optimal gold allocation.

Gold's ESG Credentials

Gold's ESG (Environmental, Social, and Governance) credentials are increasingly important for investors focused on sustainability and social responsibility. The gold industry has made significant efforts to align with these priorities.

Environmentally, responsible gold miners follow strict standards to reduce their impact, such as improving water and energy efficiency, reducing emissions, and rehabilitating land. While gold extraction does affect the environment, the industry is working to operate more sustainably.

Socially, gold mining delivers economic benefits to host communities and countries. Companies provide jobs, pay taxes, and invest in local infrastructure and services. Most of the value generated stays in these communities, advancing their development goals.

Gold itself may help investors manage climate-related portfolio risks. Its low carbon footprint can reduce the overall emissions intensity of a portfolio. And the gold industry's positive decarbonization outlook could make it more attractive as investors focus on climate alignment.

However, not all gold meets the same ESG standards. Investors need to seek out gold from responsible sources, such as miners with strong ESG track records or gold certified by schemes like the Responsible Jewellery Council's Chain of Custody Standard. By supporting responsibly produced gold, investors can drive further progress on sustainability.

Potential Risks & Challenges

As with any asset, investors need to understand gold's potential drawbacks. Key considerations include:

• No cash flows: Unlike bonds or dividend-paying stocks, gold does not generate income. Investors rely solely on price appreciation. However, gold's long-term returns have been driven by recurring demand and supply dynamics.
• Price volatility: While gold is less volatile than many risk assets, commodities and alternatives, it can experience substantial swings in some years. However, gold has an asymmetric profile - it gains more when equities fall than it loses when equities rise.

Key Takeaways for Investors

Gold offers several strategic benefits for long-term investors:

• Gold has a long track record of delivering positive returns over the long run, outpacing inflation and performing well in both good and bad economic times. This is supported by diverse sources of demand.
• Gold is an effective diversifier that becomes more negatively correlated with equities and other risk assets during market downturns. But it can also deliver positive returns in expansions, making it a well-rounded hedge.
• Gold's highly liquid market, valued at over $6 trillion, provides ample capacity for large institutional investors to build positions without impacting the market.
• Adding even a small allocation to gold has historically improved the risk-adjusted returns of a traditional stock/bond portfolio, reducing volatility and drawdowns.
• Gold has strong ESG credentials, with leading miners working to minimize environmental impacts, make positive social and economic contributions, and reduce investor exposure to climate-related portfolio risks.

Ultimately, these attributes suggest gold deserves a strategic allocation in diversified investment portfolios. The optimal allocation depends on an investor's specific risk tolerance and portfolio composition. But even a small allocation has the potential to materially enhance outcomes for long-term investors.

5 Companies to Watch in 2025

Perseus Mining

Perseus Mining Limited is a standout performer in the gold mining industry, with strong operational results, a disciplined cost management approach, and a focus on long-term value creation. The company operates three productive mines across Africa (in Ghana, Côte d'Ivoire, and Senegal) and continues to develop new projects, positioning it for sustainable growth well into the future.

Key Drivers for Investment:

• Operational Excellence: In 2025, Perseus remains a low-cost gold producer with an all-in sustaining cost (AISC) of $1,127 per ounce, well below the industry average. This cost efficiency translates into significant margins, even in volatile gold price environments. CEO Jeff Quartermaine highlighted the company's commitment to operational efficiency, stating, “We focus on producing ounces at the lowest possible cost... The gold price is somewhat irrelevant to us.”
• Robust Financial Health: Perseus ended its most recent quarter with $704 million in cash, ensuring flexibility for strategic growth initiatives. In 2024, the company successfully balanced dividends, share buybacks, and M&A, underscoring its commitment to delivering value to shareholders. This financial stability supports the company's ability to weather market challenges and invest in future projects.
• Strong Growth Pipeline: Perseus' recent decision to develop the first underground mine in Côte d'Ivoire demonstrates its focus on extending mine life and sustaining long-term production. The development of additional large-scale projects, such as the Nyanzaga project in Tanzania, is expected to drive further production growth.
• Geographical Diversification: Operating in five countries, Perseus has a diversified risk profile. Despite perceived risks in Africa, the company has consistently demonstrated its ability to navigate local challenges effectively. Jeff Quartermaine emphasized this point, stating, “It’s not about where you operate but how you run your business... You can run a business very well or very poorly no matter where you are.”
• Commitment to Sustainability: Perseus places significant emphasis on maintaining its social license to operate, ensuring that communities and host governments benefit from its presence. Quartermaine affirmed, “You can have the best assets in the world, but if you're not welcome in a host community or government, you don’t actually have anything.”

Perseus Mining is positioned to deliver consistent returns to shareholders through a combination of low-cost production, robust cash flow, and strategic growth initiatives. Its commitment to operational excellence and sustainability sets it apart in the gold mining sector, making it a compelling investment for both short-term and long-term investors.

West Red Lake Gold Mines

West Red Lake Gold Mines (WRLG) is poised to become a significant Canadian gold producer with its Madsen Mine in Ontario's Red Lake district moving towards production. The company has adopted a disciplined approach to development, emphasizing operational readiness and a focus on profitability. With a pre-feasibility study (PFS) showcasing compelling economics and a clear plan for future growth, West Red Lake Gold offers an attractive investment opportunity.

Key Drivers for Investment:

• Strong Project Economics: The Madsen Mine's pre-feasibility study reports an after-tax net present value (NPV) of CAD 315 million and an impressive internal rate of return (IRR) of over 255%, underscoring the project's robust economic potential. CEO Shane Williams highlighted the project's cost efficiency, stating, "We've raised capital, de-risked the project, and now we have a very high IRR. There are very few projects out there with that kind of IRR in place."
• Proven Infrastructure and Low-Capital Intensity: West Red Lake Gold Mines acquired the Madsen Mine for "cents on the dollar," inheriting infrastructure valued at approximately CAD$350 million, significantly reducing the capital required for development. With approximately CAD$100 million invested to date, the company is well-positioned to achieve production quickly and cost-effectively. The existing mill can handle up to 1,100 tonnes per day, providing immediate scalability without major capital investment.
• Operational Readiness and De-Risking: The company has taken an 18-month operational readiness approach, emphasizing development, drilling, and operational systems before production. This approach mitigates startup risks and ensures flexibility in underground mining, which is critical for success in challenging conditions. As Shane Williams stated, "We've done 18 months of operational readiness, setting up systems, procedures, and teams. That’s key to avoid the failures others experience."
• Exploration Upside and High-Grade Potential: While the current PFS focuses on a six-year mine life with annual production of 67,000 ounces, the district’s geology suggests significant resource expansion potential. The Rowan deposit and other satellite targets offer grades as high as 12-14 grams per tonne, which could substantially enhance project economics. Williams noted, "Grade is the key to these underground mines. Bringing in higher-grade material like Rowan or the 8 Zone will really sweeten the project."
• Scalability and Path to Expansion: The Madsen Mine’s modular design allows for rapid scaling. Production can increase from 800 tonnes per day to 1,500 tonnes per day with modest capital investment (~CAD$35 million). This scalability ensures West Red Lake Gold Mines can adapt to market conditions and resource discoveries, driving long term growth.

West Red Lake Gold Mines is set to begin production by mid-2025, targeting steady cash flow generation and operational excellence. Its focus on high-margin production, disciplined capital management, and significant exploration upside positions the company as a compelling investment in the gold sector. As Williams emphasized, "We’re focused on producing cash, not just ounces. It's about driving margin and building a sustainable business."

Cabral Gold

Cabral Gold is strategically positioned to unlock the value of the Cuiú Cuiú gold district in Brazil's Tapajós Gold Province, historically one of the most prolific gold-producing regions in the country. With a two-stage development strategy focused on generating near-term cash flow and advancing exploration of its significant resource base, Cabral Gold offers an attractive opportunity for investors seeking high-grade exploration upside and potential production growth.

Key Drivers for Investment:

• Exciting High-Grade Discoveries:The 2024 discovery at the Machichie NE target, with drill intercepts including 11m @ 33g/t gold and 5m @ 24.5g/t gold, highlights the exceptional high-grade potential of the Cuiú Cuiú district. Cabral Gold aims to rapidly assess the target's contribution to enhancing the project’s overall resource base. With multiple discoveries such as Machichie Main and Jerimum Cima, the district continues to demonstrate substantial untapped exploration upside.
• Clear Path to Production and Cash Flow: The recently completed pre-feasibility study (PFS) for a 720,000-tonne-per-year heap-leach operation confirms robust project economics, with an after-tax IRR of 47.3% and an NPV5 of US$25.2 million at a conservative gold price of $2,250/oz. This starter operation is expected to provide early cash flow, enabling the company to fund aggressive exploration efforts without reliance on equity financings. CEO Alan Carter stated: “The initial heap-leach operation is a major step forward in demonstrating Cuiú Cuiú’s economic potential and allows us to grow organically while minimizing shareholder dilution.”‍
• Two-Stage Growth Strategy: Cabral Gold’s phased approach is designed to maximize the value of the Cuiú Cuiú district:‍
  • Stage 1: Generate cash flow from the near-surface oxide resources through the initial heap-leach operation.‍
  • Stage 2: Expand the resource base by exploring deeper, higher-grade hard rock targets to support a much larger operation. This strategy offers a scalable path to growth, underpinned by systematic resource upgrades and exploration.‍
• Significant Exploration Upside in a World-Class Gold District: Cuiú Cuiú hosts two defined gold deposits, three major discoveries, and over 50 additional targets within a highly prospective district. Planned trenching and drilling at high-priority targets like Jerimum Cima, which spans 1,000m x 900m, and the high-grade Central gold deposit will further strengthen the oxide project and expand the hard rock resource potential. “The Cuiú Cuiú district’s exploration potential remains extraordinary. Each discovery adds quality ounces to the resource base, enhancing both short-term and long-term value,” said the management team.‍
• Strategic Financing and Experienced Team: Despite challenging market conditions, Cabral raised $4.36M in 2024 to fund its operations. The company has strengthened its leadership team with key appointments, including a VP of Exploration and Technical Services and a CFO with significant production experience. These additions underscore Cabral’s focus on efficient project execution and long-term operational success.

Cabral Gold’s dual focus on near-term cash flow generation and long-term exploration growth positions it as a leading junior gold exploration and development company in Brazil. With its high-grade discoveries, strategic development plan, and presence in a world-class gold district, Cabral Gold is well-equipped to deliver significant returns for investors as it advances the Cuiú Cuiú gold project.

First Mining Gold

First Mining Gold is advancing two of Canada’s largest undeveloped gold projects, positioning itself as a premier gold developer in top-tier mining jurisdictions. With a robust portfolio led by the Springpole and Duparquet Gold Projects, the company offers significant leverage to rising gold prices and long-term value creation potential.

Key Drivers for Investment:

• Springpole Gold Project: A World-Class AssetThe Springpole Gold Project in Ontario is one of the largest undeveloped open-pit gold deposits in Canada, with Proven and Probable Reserves of 3.8 Moz gold and 20.5 Moz silver. The project boasts attractive economics with an after-tax NPV5% of $995M and an IRR of 29.4% at a conservative $1,600/oz gold price. With a low AISC of $577/oz in the first nine years of production and annual output averaging 335,000 ounces of gold, Springpole is a cornerstone asset in First Mining’s portfolio.
• Duparquet Gold Project: A High-Potential Growth Asset: Located in Quebec’s prolific Abitibi Greenstone Belt, the Duparquet Gold Project adds a strong second pillar to First Mining’s portfolio. The project features 3.4 Moz of Indicated Resources and 2.6 Moz of Inferred Resources with compelling economics: an after-tax NPV5% of $588M and an IRR of 18% at $1,800/oz gold. With significant infrastructure in place and an 11-year mine life, Duparquet has the potential to deliver 233,000 ounces of gold annually, with substantial upside from future resource expansion.
• Advancing Exploration and Permitting: In 2024, First Mining made significant progress at both flagship projects:
  • At Springpole, exploration focused on the East and Southwest Extensions, uncovering promising mineralization that could enhance the mine plan.
  • At Duparquet, the company completed 12,474m of drilling, identifying high-grade zones and brownfield expansion opportunities.
  • For 2025, First Mining plans to further expand these projects’ resource bases while advancing permitting and engineering work to ensure their development timelines remain on track.‍
• Strategic Location and Jurisdictional Advantage: Both Springpole and Duparquet are situated in Canada’s top-tier mining jurisdictions, benefiting from established infrastructure, supportive regulations, and proximity to skilled labor. These locations mitigate geopolitical risk while enhancing project feasibility and stakeholder engagement.‍
• Clear Path to Value Creation: First Mining’s strategy focuses on maximizing shareholder returns by advancing its assets to production while maintaining low costs and a disciplined capital allocation approach. With current gold prices exceeding the economic assumptions in its feasibility studies, the company is well-positioned to unlock significant value. First Mining also prioritizes sustainability and community engagement, ensuring long-term operational success.

First Mining Gold offers an attractive investment opportunity with a portfolio of world-class development projects, robust economics, and a clear growth trajectory. With ongoing exploration success, permitting progress, and leverage to rising gold prices, the company is poised to deliver significant returns for investors in the coming years.

Serabi Gold

Serabi Gold is a Brazilian-focused gold producer and developer with a track record of consistent production and a clear path to substantial growth. The company is executing a three-phase strategy to double production by 2026 and unlock further upside through resource expansion and strategic development.

Key Drivers for Investment:

• Strong Production Growth & Operational Excellence: Serabi achieved record quarterly gold production of 10,022 ounces in Q4 2024, marking its highest output in five years. Full-year 2024 production reached 37,520 ounces, a 13% increase year-over-year.
  • 2025 production guidance: 44,000 – 47,000 ounces
  • Higher grades at the Palito Complex (6.10 g/t gold) due to selective mining techniques.
  • The newly commissioned Coringa classification plant is improving efficiency by pre-concentrating ore before trucking it to Palito for processing.
• Coringa Mine: The Next Growth Phase: Coringa is the key driver of Serabi’s expansion, with an expected increase in production to 60,000 ounces per year by 2026.
  • Ore sorting technology optimizes processing by reducing waste and transportation costs.
  • Orebody performing well, with multiple levels already developed ahead of stoping.
  • Final operating permit pending, setting the stage for full-scale production.
  • The 2024 PEA confirms robust economics:
    • Post-tax NPV5% of $184M at a $2,100/oz gold price.
    • Mine life of 11 years, with 97% recovery rates.
    • AISC of $1,241/oz, with potential cost reductions as scale increases​.
• Significant Exploration Upside in the Tapajós Gold Province: The Tapajós region, historically Brazil’s largest artisanal goldfield, remains underexplored for hard rock deposits. Serabi controls a highly prospective land package with multiple brownfield and greenfield targets.
  • Palito Complex: Continues to add resources, with underground drilling expanding high-grade zones.
  • Coringa: High-grade mineralization remains open at depth and along strike, supporting future growth.
  • New discoveries: The Matilda copper-gold porphyry discovery and São Domingos deposit represent major exploration upside.
• Sustainability & Cost Efficiency: Serabi maintains one of the lowest carbon footprints in the gold mining industry, 45% below peer averages.
  • Minimal environmental impact: No conventional tailings dams; dry stacking technology in use.
  • Locally driven operations: 70% of the workforce is from the Pará state, with strong community investment.
  • Declining AISC trend: Costs expected to drop as Coringa scales up production​.
• Robust Financial Position & Valuation Upside: Serabi ended 2024 with $22.2M in cash, up from $11.6M in 2023, and net cash of $16.2M.
  • Self-funded growth: Expansion is fully financed from cash flow.
  • Undervalued relative to peers:
    • EV/Production of $2,176/oz, well below the peer average of $3,405/oz.
    • EV/EBITDA multiple of 1.9x, compared to the sector average of 3.5x, indicating significant re-rating potential​.

Serabi Gold is on track to double its production to over 60,000 ounces per year by 2026, underpinned by high-margin assets, low-cost growth, and exploration upside. With an improving balance sheet, scalable operations, and an attractive valuation, Serabi is well-positioned for a re-rating as it executes its growth plan.