Gold Surge to Continue Towards 2025 on Strong Demand, Rate Cuts and Geopolitics Drivers

• Gold prices have shown modest increases in 2024, reaching approximately $2,650 per ounce, partly attributed to anticipated Federal Reserve rate cuts.
• Throughout 2024, gold has demonstrated strong performance, with prices increasing by over 30% since the beginning of the year, driven by robust investment demand and central bank purchases.
• Geopolitical tensions, inflation concerns, and Federal Reserve policies have been key influences on the recent performance of gold prices.
• Investors have several avenues to gain exposure to gold, including physical gold, ETFs, and stocks of gold mining companies like Aris Mining, Integra Resources, Vista Gold, Osisko Development, and Amex Exploration.
• Gold offers benefits such as diversification, inflation protection, safe-haven value and liquidity, making it a significant component of investment portfolios.

Gold has long been regarded as a safe-haven asset, attracting investors during times of economic uncertainty. In 2024, gold's appeal has been particularly pronounced, with prices reaching new heights and significant market activity surrounding gold-related investments. Gold continues to play a significant role in investment portfolios, offering benefits such as diversification, inflation protection, and stability during uncertain times. By staying informed about market dynamics and carefully considering investment options, investors can make strategic decisions regarding gold investments.

The Current Market Landscape

As of December 2024, gold prices have shown a modest increase, trading at approximately $2,650 per ounce. This uptick is partly attributed to investor anticipation of the Federal Reserve's upcoming monetary policy decisions, including a potential interest rate cut. Analysts suggest that while a rate cut appears likely, the focus remains on the Fed's future stance on rate adjustments.

Throughout 2024, gold has demonstrated strong performance, with prices increasing by approximately 28.7% since the beginning of the year. This growth is driven by robust investment demand and substantial purchases by emerging market central banks.

Market Dynamics and Influences

Several factors have contributed to the recent performance of gold:

• Geopolitical Tensions: Ongoing geopolitical uncertainties, such as conflicts in various regions, have historically driven investors toward gold as a safe-haven asset. These tensions continue to play a role in gold's appeal.
• Inflation Concerns: Persistent inflation worries have led investors to seek assets that can preserve value, with gold often viewed as a hedge against inflation
• Federal Reserve Policies: The anticipation of interest rate cuts by the Federal Reserve has influenced gold prices. Lower interest rates can reduce the opportunity cost of holding non-yielding assets like gold, making it more attractive to investors.

Federal Reserve Policies on the Gold Outlook

The Federal Reserve's monetary policy decisions continue to be a key driver of gold prices. Investors are closely monitoring the upcoming Federal Reserve meeting, where the central bank is widely expected to deliver another 25 basis point interest rate cut, marking the third cut this year. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, enhancing its appeal. Analysts at UBS anticipate a total of five rate cuts through 2025, which could propel gold prices to $2,900 per ounce by mid-2025. Citi analysts echo this sentiment, expecting gold demand to remain strong until U.S. and global growth stabilizes, with the potential for gold to peak around Q4 2025 or Q1 2026. As the market awaits clarity on the Fed's future rate path and forward guidance, gold is likely to remain supported by the prospect of a persistently dovish monetary policy stance. [2]

Gold-Related Investment Vehicles

Investors have several avenues to gain exposure to gold, including stocks of gold mining companies. Below are some of the prominent explorers and developers in the gold market sector:

Aris Mining

Aris Mining is a compelling gold investment poised to benefit from the supportive macro environment. The company's fully funded and permitted plan to double production to 500,000 oz/yr within 2 years through high-return, low-risk brownfield expansions. Aris' portfolio of cornerstone assets in the Americas, anchored by the world-class and expanding Segovia mine, generate significant cash flow that will drive a rapid deleveraging of an already clean balance sheet. The high-grade and low-cost ($1,200/oz AISC) nature of the company's asset base provides margin expansion potential and resilience if cost pressures persist. With a deep pipeline of near-term catalysts and long-term growth optionality from the Soto Norte project, Aris Mining is ideally positioned to outperform in the rising gold price environment.

Integra Resources

Integra Resources offers compelling exposure to the rising gold market through its diversified project portfolio and fully-funded growth strategy to become a 250,000 oz/year producer. The recent acquisition of the Florida Canyon mine provides immediate cash flow to advance the DeLamar and Nevada North projects, insulating Integra from needing to raise capital in uncertain markets. DeLamar's upcoming feasibility study and permitting catalysts in a historic mining district, combined with Nevada North's longer-term growth optionality, position Integra to benefit from the flight to safe-haven assets and investor demand for gold equities.

Vista Gold

Vista Gold's new 15,000 tpd development approach for the Mount Todd project exemplifies how gold developers are adapting to enhance economics in an inflationary environment. By focusing on a smaller but higher-grade operation with reduced $400M capex, Vista improves project resilience and profitability even if cost pressures persist. The fully-permitted status allows for quick mobilization to construction, while the use of contract mining provides flexibility. With the gold industry struggling to replace reserves and higher prices driving M&A, an advanced and optimized project like Mount Todd should attract strategic interest. Vista Gold's upcoming feasibility study results may be well-timed to benefit from the positive gold market sentiment.

Osisko Development

Osisko Development stands out as a compelling gold investment through its flagship Cariboo project in British Columbia. With key permits received, a robust resource base, and a strong treasury, Osisko is well-positioned to benefit from the rising gold price environment and investor focus on advanced, de-risked projects. The experienced management team, led by proven mine-builder Sean Roosen, has a track record of value creation and a bold vision to develop Cariboo into a major 500,000 oz/year mining camp. As the gold industry grapples with declining reserves and a scarcity of large, high-margin deposits, Cariboo's meaningful production profile and exploration upside distinguishes Osisko from its developer peers and likely to to re-rate higher as they derisk projects and move towards production decisions in a rising gold price environment.

Amex Exploration

Amex Exploration's high-grade Perron project in Quebec exemplifies the type of quality gold asset poised to outperform in the current macro environment. With a recently published PEA demonstrating a low capex of $230 million and potential for $133 million in annual free cash flow at $2,000 gold, Perron is a rare combination of grade, profitability and manageable scale ideal for the inflationary cost environment. The deposit's exploration upside, with mineralization open in all directions, provides a path for organic resource growth to further enhance already robust economics. As investors gravitate towards gold developers with clear paths to low-cost production in stable jurisdictions, Amex's plans to grow the resource and advance permitting in Quebec position it favorably.

The Investment Thesis for Gold

Investors considering gold may find the following points noteworthy:

• Diversification: Gold's low correlation with other asset classes can enhance portfolio diversification.
• Inflation Hedge: Historically, gold has preserved purchasing power during periods of inflation.
• Safe-Haven Asset: In times of economic or geopolitical uncertainty, gold often retains value, providing stability.
• Liquidity: Gold and gold-related investments are generally liquid, allowing for ease of entry and exit.

Actionable Advice for Investors

• Assess Portfolio Allocation: Consider allocating a portion of portfolio to gold or gold-related assets to enhance diversification and hedge against potential risks.
• Stay Informed on Monetary Policies: Monitor central bank policies, as changes in interest rates can impact gold prices.
• Evaluate Investment Vehicles: Choose the appropriate investment vehicle—physical gold, ETFs, or mining stocks—based on your investment goals and risk tolerance.
• Monitor Market Indicators: Keep an eye on geopolitical developments and inflation indicators that may influence gold prices.

Gold's enduring appeal lies in its ability to provide diversification, act as an inflation hedge, and serve as a safe-haven asset during times of economic or geopolitical uncertainty. As investors navigate the current market landscape, a strategic allocation to gold or gold-related investments can help manage risk and potentially enhance returns. However, it is important to stay informed about monetary policy developments, geopolitical events, and other market indicators that may influence gold prices. By carefully evaluating the various investment vehicles and maintaining a long-term perspective, investors can effectively harness the benefits of gold within their portfolios.

References:

1. casmovmcas
2. Grover, Daksh (December 2024). Reuters. Gold Inches Higher on Softer Dollar as Attention Turns to Fed Meet