After posting record-breaking performance in September the gold rally is starting to show signs of slowing down as prices have retreated from their previous peak and markets await key incoming economic data that will determine the U.S. Federal Reserve’s interest rate cut decision for its upcoming November meeting.
On Monday, October 7, spot gold was trading at $2,651.48 per ounce, a drop from its former peak of $2,685.42 posted on September 26. The U.S. gold features were down 0.2% at $2,671.70.
The slower, modest performance comes as traders anticipate a smaller interest rate cut from the Federal Reserve in November. Currently, 88.9% of traders expect the central bank to lower rates by 0.25%, while 11.1% expect the Fed to slash rates with another jumbo rate cut of half a percentage point, according to the CME Group FedWatch Tool.
More than this, markets await further key economic data expected in the week ahead. Both the U.S. CPI and PPI are expected to paint a more clear picture of the direction the Federal Reserve will be taking in their upcoming meeting, and whether traders can expect another big rate cut.
However, September’s robust jobs report had already shifted sentiment as nonfarm payrolls rose by 254,000, and unemployment lowered from 4.2% to 4.1%. The better-than-expected jobs data could leave the central bank to take a less aggressive approach to lowering interest rates as the economy approaches a much-anticipated soft-landing.
Still, spot gold prices are expected to remain at a record level in the coming months as geopolitical tensions in the Middle East continue to raise concerns on the market and growing commercial and consumer demand helps to keep prices at an elevated level. In the last 12 months, gold prices have risen by over 34%, adding 4.06% in September.
Despite the recent slowdown, traders suggest that there is still a lot of potential for the rally to continue gaining momentum in the upcoming months. This could provide investors with a perfect opportunity to diversify their portfolio with mining stocks and take better advantage of mining companies currently benefiting from gold’s increased price performance.
Iamgold Corp
Iamgold Corp. (NYSE: IAG) has most likely been on investor’s radar this year as the Canadian-based mining company has managed to make impressive gains, with stock performance up by 106.56% since the beginning of the year.
The mining company owns and operates several gold mines in its native Canada and Burkina Faso. In total, Iamgold delivered more than 166,000 ounces in gold production during the second quarter, with a total of 317,000 ounces in delivery on a year-to-date basis, according to second-quarter financial earnings.
Several key mining projects have largely been attributed to the company’s strong quarter-over-quarter performance. For starters, the Côté Gold project reached commercial production during August, processed over 620.000 tonnes, and achieved a record daily production output rate of 36,000 tonnes per day.
Full-year production guidance for the Essakane and Westwood mining projects has been increased, and management now expects delivery to be around 495,000 to 540,000 ounces, an improvement from the previous guidance of 430,000 to 490,000 ounces.
Non-GAAP financial measures indicate that Q2 2024 revenues came in better than expected, as guidance of improved production output and higher gold prices helped to lift revenue. The company reported $385.3 million in revenue from sales of 167,000 ounces, with an average realized gold price of $2,294 per ounce.
Total net earnings and adjusted net earnings per share remained within the guidance outlook, with a total delivery of $0.16 and $0.16 per share, respectively.
Looking ahead, the company has strong earnings potential, as its flagship Côté Gold project in Ontario is expected to be one of the largest and most significant gold mines in North America.
In the last reporting quarter, the Côté Gold project delivered a capacity of 60.3%, or between 130,000 - 175,000 ounces. Management expects the project to be at 90% capacity near the end of the year, and deliver a 100% production output of 220,000 to 290,000 ounces.
Kinross Gold Corp
Next on the list is Kinross Gold (NYSE: KGC), which has already seen share prices increase by approximately 10.56% in the last month, and has improved by 59.12% year to date. The Canadian gold company currently operates six gold exploration projects in the United States, Brazil, Chile, Canada, and Mauritania.
The recent Preliminary Economic Assessment (PEA) of the Great Bear exploration project has delivered impressive results that would give the company additional earnings potential in the years ahead.
Data from the PEA report shows that the project holds a high-grade mineral resource deposit, with an expected mining and operation capacity of 12 years. In total, the Great Bear project will deliver a total of 500,000 ounces per year, with an all-in-sustaining cost (ASIC) of approximately $800 per ounce during the first eight years of the project life cycle.
These recent developments are part of Kinross Group’s forward-looking strategy to acquire and build a top-tier high-margin production output. Great Bear will only further contribute to this guidance, with an expected daily capacity of 10,000 tonnes.
Kinross held steady margins during the second quarter, reporting production of 535,338 gold equivalent ounces, with a production cost of sales of $1,029.00 per ounce. The production cost of sale was an increase from $900 in Q3 2023.
On a year-over-year basis, production output has declined 4%, largely due to lower quality grades at the Paracatu project in northeast Brazil, however, this is part of the planned mining sequence of the project.
For the second quarter, revenue came in better than expected, which increased from $1.09 billion in Q2 2023 to $1.21 billion for Q2 2024. Better revenue was largely due to improvements in the average realized gold price, which was $2,342.00 per ounce in Q2 2024, compared to $1,976.00 per ounce in Q2 2023.
Barrick Gold
Barrick Gold (NYSE: GOLD) has among one of the largest gold exploration footprints in the world, with mining operations in Argentina, Chile, Côte d'Ivoire, Democratic Republic of the Congo, Dominican Republic, Mali, Papua New Guinea, Tanzania, Zambia, and Saudi Arabia, in addition to key projects in the United States and its homeland, Canada.
Recent headlines revealed that a joint venture between the Tanzanian government and Barrick Gold will help contribute over 51% of the country’s mining and extraction revenue. However, this has been a long time coming, and following several years of disputes between the government and previous stakeholders of the North Mara and Bulyanhulu mines, Barrick Gold has come to a settlement that would divide ownership of the mines 50-50.
For some time already the company has been focused on new public relations strategies with the Tanzanian government. Barrick took ownership of the mines back in 2019, although coming to an agreement on the economic benefits and sharing of partnership, which includes a 16% shareholding in each mine, has taken some time to be approved. The mines are expected to deliver roughly 500,000 ounces of gold, which is expected to be produced at the lower half of the industry curve.
These recent developments will help push Barrick's performance further, with company shares up 12.47% year-to-date. Though the stock performance has been slower compared to other leading exploration companies, Barrick holds better long-term support and is considered to be an industry leader.
Increased exploration activity, alongside new partnerships, has helped the company deliver robust sales and earnings growth during the second quarter of the year. Overall, balance sheet conditions are looking good with net earnings up 25% quarter over quarter operating cash flows of $1.16 billion, and a material increase in free cash flow rose to $340 million.
In addition to this strong performance, net earnings per share were up 24% to $0.21 per share, while adjusted net earnings per share rose by 68% to $0.32 per share. The company expects that higher production output and lower costs are expected in the second half of the year, which could help further bolster financial performance.
Barrick’s recent performance showed that the company still has plenty of room for growth, and will continue to maintain this level of quality and production output. Alongside improved gold prices, Barrick is expected to largely benefit from the overall positive market sentiment, and sees better financial earnings should gold prices remain at their current level or slightly below.
Finishing Thoughts
At the current pace, gold could continue to maintain its elevated level, largely due to increased sensitivity over the ongoing political conflict in the Middle East and heightened commercial demand.
More than this, central banks have been on a gold buying spree for much of the year, with several key players including China, India, and Turkey stockpiling gold amidst wider economic uncertainty.
However, the changing economic environment in the U.S. largely driven by consumer resilience and improved labor market conditions could mean that the central bank will lower rates at a slower pace than traders initially anticipated.
With gold prices in constant flux, the last stretch of the year could see prices remain at a record level, with the expectations for the yellow metal to begin trending upward during the early months of next year. This could be the perfect time for investors to take a more open approach toward mining companies, and seek to scoop up low-hanging fruits while they’re still ripe for the picking.
