I think you want to own gold–through something like the SPDR Gold Shares ETF (GLD)–right now to profit from decreasing interest rates at most of the world’s central banks, from global macro uncertainty, from the possibility of domestic violence in the United States around the election, and from what sure looks like a train wreck in U.S. fiscal policy.
In the short term. Say six to nine months–maybe even a year–from now. The SPDR Gold Shares ETF is up 24.84% for 2024 as of the September 16 close
In that same time period I think shares of gold mining companies are likely to lag the gains in gold. Shares of Barrack Gold (GOLD), the world’s second largest gold producer, are up just 15.09% in 2024.
Why the lag? Gold mining companies face operating costs that can work against the trend of higher gold prices. Higher oil prices, for example, can lead to higher fuel costs and lower profits. Gold mining companies also don’t produce just gold. In 2023 Barrick Gold, for example produced 420 million pounds of copper. Prices for many of these non-gold “products” are economically sensitive. That means that while economic uncertainty might be good for the price of gold, that same uncertainty is likely to depress revenue from other commodities.
In the longer run, however, gold mining companies have a key advantage over gold investments that just hold gold. They produce new gold. And they can even own assets that will produce more gold in the future than they do now.
The recent presentation by Barrick CEO Mark Bristow at the Gold Forum Americas conference is a good example of what you should be looking for in gold assets beyond a 12-month time horizon. In Nevada, the company’s recently commissioned Goldrush mine is ramping up to a targeted 400,000 ounces a year by 2028, and the Fourmile mine is returning grades double those of Goldrush,.
And on this timeframe don’t overlook copper, a critical commodity for growth of almost all green-energy technologies. In Barrick’s copper operations, two transformative projects are on track for first production in 2028: The Reko Diq project in Pakistan is designed to produce 400,000 metric tons a year of copper and 500,000 ounces a year of gold in the second phase of its development, and the Lumwana Super Pit project in Zambia will double the mine’s production over a 30-year life.
I’d be looking to add to positions in gold now and to be building positions in gold mining stocks over the next 12 months with a much longer holding period.
I added shares of the SPDR Gold Shares ETF to my Jubak Picks Portfolio on August 27, 2024 (that position is up 2.67% as of the close on September 17) and I have a long-term position in Barrick Gold that is up 31.54% since June 21, 2019.
