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Investing.com - Gold-exposed stocks appear to be, as analysts at UBS put it, "enjoying some time in the sunshine."
Following a multi-year run of underperformance, gold equities have largely surpassed returns of the underlying price of the yellow metal by more than 40% so far this year.
Fueling the results of these companies has partly been a jump in bullion, with spot gold prices climbing by over 34% in the past one-year period despite being mostly range-bound recently.
Over the last three months, in particular, the GDX index -- which covers stocks exposed to gold -- has outperformed spot gold by 15%, thanks in large part to rallies in industry names like Gold Fields, Newmont Corporation, and Kinross Gold partially offsetting weakness in some large-cap Australian gold players such as Northern Star Resources (ASX:NST) and Evolution Mining.
It was a sign of a sharp reversal in the GDX’s fortunes after the index lagged behind the gold price by roughly 50% between 2019 and the end of 2024.
"Gold miners have had a poor track record in recent years resulting in valuation de-rating; but in our view the first quarter results were a net positive" for many of these businesses around the world, the UBS analysts said in a note.
"While it’s still early days in our view the sector is starting to rebuild investor confidence [slash] trust."
Should gold prices remain around their current levels, stock buybacks at gold companies are tipped to accelerate in the second half of 2025, the analysts predicted.
They also see the potential for mergers activity to "heat up," but said the message from most gold firms "appears to be disciplined organic growth and a bias to regional consolidation and portfolio tidy-up" over dealmaking.
But as the cycle of strength in gold stocks and the metal matures, the analysts said they are becoming "more selective" in the equities they prefer, shifting their focus from "’relatively expensive outperformers’ to some of the ’cheaper turnaround stories.’"
Barrick Gold, Endeavor, Kinross, AngloGold and Franco-Nevada were their preferred gold stocks, while Agnico, Wheaton and Fresnillo were downgraded to a "neutral" rating.