Gold and its miners may enjoy a ‘critical mineral' upgrade

Globe and Mail

7 hours ago

Is gold the next metal to be added to the list of 'critical minerals'?
Gold is not a vital component of advanced manufacturing like other critical minerals such as rare earths, lithium and copper.
But the precious metal appears to be undergoing a subtle shift in how it is viewed by governments and investors.
Since countries moved away from the gold standard by the early 1970s, gold has largely been viewed as a relatively niche part of investment portfolios and government reserves.
Gold was something that was added to portfolios as an inflation hedge or during times of heightened geopolitical tensions.
In some ways, the role of gold in both central bank and investment portfolios was overtaken by bonds, with U.S. Treasuries becoming the most important of these assets.
But the return of Donald Trump to the U.S. presidency is leading to a global reassessment of the relative safety of U.S. assets, the independence of the Federal Reserve and the likely worsening of the U.S. fiscal position.
Add in Mr. Trump's attacks on the rule of law in the United States and the likely hit to both the U.S. and global economies from his trade policies, and the stage is set for a reevaluation of the role of gold.
The precious metal has gained 32.3 per cent from a low of US$2,536.71 an ounce hit on November 14 in the days after Mr. Trump's victory over his Democratic Party rival, former Vice President Kamala Harris.
It reached a record high of US$3,500.05 an ounce on April 22, and has since retreated slightly to close at US$3,357.08 on Wednesday.
While gold's day-to-day moves are still largely driven by the news cycle, the overall backdrop looks supportive.
The World Gold Council released a report last month in which it surveyed 73 central banks, and 95 per cent of them expected the official sector to increase holdings in the coming 12 months.
'This is a record high since it was first tracked in the 2019 survey and represents a 17-per-cent increase from the 2024 findings,' the council said.
Central banks are also moving to repatriate more of their holdings back to their home countries and away from the United States, a further sign that there is a loss of confidence in U.S. assets and the policies of the Trump administration.
Gold is also well-placed as one of the few viable alternatives if more governments, fund managers and private investors outside the United States form the view that the era of U.S. exceptionalism is over and that U.S. Treasuries are now a riskier asset as the country's fiscal position deteriorates.
Another factor that is showing the positive story for gold is the performance of gold mining equities.
Major gold producers have seen their share prices rise at a far faster pace than the actual metal.
There are several reasons why this could be the case, including the expectation that shareholders will receive higher dividend payouts in the future and that companies are being rewarded for showing capital discipline in prior years.
But it also may be that investors are starting to re-rate gold mining companies in the expectation that gold becomes a more vital and larger part of portfolios, both public and private.
For example, shares in Newmont (NEM-N, NGT-T) , the world's largest listed gold miner, have risen 63 per cent from their most recent low on December 30 to close at US$60.06 on Wednesday.
Canada's Barrick Mining (B-N, ABX-T) has seen its shares gain 40.6 per cent in U.S. dollar terms from its recent low on December 19 to the close on Wednesday.
Anglogold Ashanti (AU-N) shares in New York have surged 108 per cent from the low on December 30 to the close of US$46.66 on Wednesday, while Gold Fields (GFI-N) has seen a gain of 88 per cent in U.S. dollar terms from its November 14 low to the close on Wednesday.
If gold does become a more central part of investment strategies, the listed miners are likely to become more attractive, given the difficulty of finding and developing new projects and the long time between exploration and production.
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