Gold miners are about to report their best quarter ever, smashing all previous records. With gold prices reaching historic highs and mining costs either stable or falling, profits are set to soar. However, gold stocks are still trading as though earnings and gold prices were much lower—an extreme valuation anomaly. The upcoming Q4 and 2024 results should help correct this mispricing, drawing more attention from investors to this high-potential sector.
Quarterly earnings reports provide a crucial reality check on stock prices, cutting through the sentiment-driven fog and revealing how companies are actually performing. While Q4 results are typically released later than other quarters, they offer the most comprehensive data for the full year. This means we won’t see Q4’s numbers until mid-March, but based on previous trends, we can predict that the results will be stellar.
The best gauge for gold miners’ performance is their implied sector unit profits—essentially, the difference between average gold prices and the miners’ all-in sustaining costs (AISCs) per ounce. This metric avoids distortions from non-cash items like asset write-downs and impairment charges, providing a clearer picture of profitability.
In Q4’24, gold prices hit a record $2,661 per ounce, a 34.7% year-over-year increase. At the same time, AISCs for the top 25 gold miners are expected to be lower, as production increases and costs stabilize. This combination will result in record profits, likely doubling compared to Q4’23.
Despite this growth, gold stocks have underperformed, with GDX rising only 31.1% over the past year compared to a nearly 99% profit increase in the sector. This disconnect is a massive valuation anomaly and won’t last much longer. As gold miners report their best-ever results, institutional investors will take notice, driving significant upward momentum for the sector.
Gold stocks are deeply undervalued, and with rising profits and technical breakouts on the horizon, it won’t take much buying to propel them to new highs. The current undervaluation presents an excellent buying opportunity, particularly for mid-tier and junior miners, who are outperforming their larger peers.
