The gold price rocketed 44% over the last year, but gold stocks did even better. From Moneyweb.
Gold has been a rather miserable performer for much of the last five years, but all that changed a year ago.
It is up 44% since February 2024 and this week traded at $2 945/oz, with $3 000/oz now clearly in sight. That’s a massive psychological barrier, spoken about for years, about to be breached.
But the real action was in gold shares which provide geared exposure to the gold price.
The gold pickings on the JSE have thinned out in recent years, which signifies SA’s waning importance as a global producer.
AngloGold Ashanti is up 73% over the last 12 months, substantially better than a pure gold investment.
Its results for financial 2024 demonstrate the enormous leverage the company has to the gold price – gross profit over the year more than doubled to $2.1 billion, with profit before tax spiking to $1.7 billion from $63 million the prior year.
DRDGold is up 51% over the last year, somewhat better than gold’s 44%.
The company reported interim results for the six months to December 2024, awarding investors with a 50% higher dividend over the previous period. A 26% gain in the received gold price made the world of difference, translating into a 65% spike to about R1 billion in headline earnings.
Like most gold producers, DRDGold plans to expand output to benefit from a higher gold price. It is targeting 200 000/oz output by 2028 from 2025’s projected production of about 155 000-165 000/oz. Greater reliance on solar and battery energy should help to limit cost increases in the coming year, which leaves it amply leveraged to a rising price of gold.
Gold Fields
This week Gold Fields reported a 77% jump in profits to $1.24 billion for the year to December 2024, despite producing 10% fewer ounces.
All-in costs (AIC) came in a shade under $1 900/oz, which is high and will have to be monitored going forward, but not particularly worrying with a gold price now around $2 945/oz.
Gold Fields has eight operating mines in Australia, Ghana, Peru and South Africa and two gold projects in Canada and Chile. A surging gold price camouflaged a number of operational problems, such as delays in ramping up production at its new Salares Norte mine in Chile, and an 18% increase in capex costs for waste stripping at its Gruyere and St Ives gold mine in Western Australia, and Tarkwa in Ghana.
Gold Fields shares are up about 30% so far this year, having traded in a narrow range for the last two years.
It’s been the least exciting of the local gold stocks, but should be one to watch in the coming financial year.
Harmony Gold
Harmony Gold shares more than doubled over the last year, given impetus in February with the guidance notice indicating recovery grades are likely to be higher than the expected 5.80 grams a ton, driven mainly by exceptional results from its Mponeng mine, south of Joburg.
It expects to exceed its 2025 full-year production guidance of 1.4-1.5 million ounces, while the company continues to bank cash to fund its capital projects. It is the largest gold producer by volume in SA, where it has three operations, alongside one each in Australia and Papua New Guinea.
Gold in context
Why gold is moving should not be a surprise: central banks are hoarding gold as an anchor to massive expansion of money supply and debt since 2020 – budget deficits are rising, and this fuels fears of inflation.
Then there’s the matter of more than 12.5 million ounces of gold being moved from London to the US since November 2024, sparking a global supply shortage.
Elon Musk and others are calling for an audit of the US gold repository at Fort Knox, which last happened in 1974 – and even that was far from a full audit.
Market analyst Matt Smith argues that the current shortages of physical gold in London are the result of someone – likely the US Treasury or the Federal Reserve – buying ahead of a full-on gold audit. He believes this gold was probably leased out and is now being repatriated.
“Once audited, that gold could form the backbone of a new monetary system. This could signal a seismic shift in the dollar’s status and value.”
Where gold goes from here is the subject of sometimes wild speculation: anywhere from $3 200 to $20 000. That may seem extreme but is not without historical precedent, given the 24-fold increase between 1970 (when gold was priced at $35/oz) and 1980, when it shot to $850/oz.
Getting exposure to physical gold
One way to get exposure to physical gold is via the 1invest Gold ETF, backed by physical gold. It has appreciated 382% in ZAR since April 2016, reflecting a rising gold price accelerated by ZAR depreciation.
Then, of course, there are Krugerrands and bullion bars.
Gold is up 128% in USD and 184% in ZAR since 2016.
Most gold miners have spent the last few years building up cash in anticipation of just such a gold boom as we are now witnessing.
That puts them in a position to deploy capital for enlargement, and while gold prices remain at these levels or higher, we should expect a bidding war for smaller gold deposits to shore up older, dwindling reserves.
