Reported 12 months ago
According to a report by the World Gold Council on July 3, 2024, central banks globally have been increasing their gold reserves to a new high in the past five years, with some even expressing intentions to replace their US dollar reserves with gold. This has the potential to continue boosting gold prices, allowing undervalued gold mining stocks to rise above average. The expectations of a US rate cut in the second half of the year are also contributing to the increase in gold prices. With uncertainties in the global economic environment and geopolitical factors still existing, more central banks are planning to continue increasing their gold reserves by 2025, potentially further boosting gold performance. Despite gold mining stocks showing low correlation with gold prices in recent years, the sector's performance is expected to improve due to easing inflation and better cost control. Gold mining companies' performance tends to benefit from rising gold prices as it leads to higher cash flows and profit margins. Recently, gold mining stocks have outperformed gold price increases, deviating from the trend of lagging behind in previous years. This positive performance is attributed to inflation easing, improved cost control prospects, enhanced cash flows from rising gold prices, acquisitions by gold companies, and better stock price performance. Observing the performance of the gold mining index in recent months, they have surpassed the rise in gold prices. The optimism towards the future prospects of gold prices is fueled by economic uncertainty, central bank buying, and geopolitical tensions driving strong gold demand, reinforcing gold's practicality in a globalized world amidst intensified geopolitical conflicts. The expectation of increased merger and acquisition activities this year, due to insufficient investment by larger gold mining companies in exploration, is likely to benefit medium and small-sized gold miners with exploration rights or existing reserves. Overall, the outlook is positive for gold prices, with expectations of stock prices of gold mining companies rising back to average levels, as their valuations remain underestimated, indicating potential for them to catch up to gold prices, and a positive view on the future of gold funds.
Source: YAHOO