Goldman Sachs versus Citi’s bullion outlook
Goldman Sachs recently hiked its year-end gold price forecast to $2,700 per ounce from $2,300, saying the metal’s bull market is not being driven by the usual macro factors. “With Fed cuts still a likely catalyst to soften the ETF headwind later in the year, and right tail risk from the US election cycle and fiscal setting, gold’s bullish skew remains clear,” Goldman analysts said in a note.
Meantime, Citi recently lifted its 6-12 month topside levels towards its “bull-case scenario” to $3,000/oz. It says rather than a demand for duration or a weakening US dollar driving the record run for gold, a potent combination of alternative-fiat demand, geopolitical hedges, macro-overlays on equity and credit portfolios, and financial buying catching up to robust physical demand are “working in sync” to push bullion higher.
A glimmer of profit in Australian mines
Of course, investors and traders need companies which can ‘make hay while the sun shines’ when it comes to the gold price. In terms of Australian production, UBS said in a recent note with spot gold already running ahead of its “bullish” forecast of $2,300/oz by the end of the calendar year, if the gold price holds at current levels it sees a 20% upside to its net present values (NPVs) at US$2,000/oz.
UBS analysts say while WA rainfall is the latest production challenge. And even in the face of the recent re-investment cycle and poor production performance pressing free cash flow and margins, gold stock’s underperformance could be a “distant memory” if the spot price holds.
The appeal of Evolution Mining’s diverse portfolio
Evolution Mining’s (EVN) production report came in line with expectations for the March quarter, with its all-in-sustaining-cost (AISC) at $1,464/oz. Guidance was unchanged targeting the low end of gold production and costs. UBS says it requires a very strong June quarter for gold production at higher grades across its Cowal, Mungari, and Red Lake projects. It has a ‘buy’ rating on the stock with a $4.35 price target, saying the company “looks good into FY25.”
Evolution is a top preference for Morgan Stanley while Todd Warren from Tribeca told ausbiz they also like the stock due to its exposure to not only gold but also copper.