Gold: no longer sexy but always in vogue

The investment rationale for gold can be succinctly summarised as an unparalleled risk diversifier and a safe-haven asset.

Yet despite the Aussie gold price breaching $3,000 this year and currently sitting at about $3,160 an ounce, gold mining stocks are undervalued on a relative and absolute basis. 

The sentiment from Diggers & Dealers this year has been the clearest indication that the precious metal has lost its lustre in favour of other metals that are battery and critical in nature. That is, lithium, for the most part.

As Great Boulder Resources (ASX:GBR) Managing Director Andrew Paterson puts it: “Gold just isn’t sexy at the moment so it’s very difficult to hold investors’ interest.”

“Gold just isn’t sexy at the moment so it’s very difficult to hold investors’ interest

Sprott Asset Management shares a similar sentiment. Sprott notes that gold explorers and developers are trading at extreme discounts to their producing counterparts. In fact, following the August 2011 peak, gold mining equities have significantly underperformed the metal’s price.

Mine Life Founding Director and Senior Resource Analyst Gavin Wendt explains it as: “Investors being confronted with a cocktail of uncertainty during 2023.”

Wendt says the investors have been spooked by concerns regarding interest rates, Chinese economic health, global economic growth, and fears of recession.

In a September 2023 report, the World Gold Council notes that amid economic uncertainty Australian investors have, so far this year, been reallocating to fixed income assets. 

The World Gold Council says that although currently attractive, persistent inflationary pressure can bring risks to both the growth outlook and return for these assets. The council says gold should be considered as a long-term strategic asset alongside bonds as it provides excellent returns in a wide range of economic scenarios.

Following a strong 2022 in which it gained 7%, gold in Aussie dollars capped another gain of over 12% during the first 8 months of this year – once again outrunning other major assets. 

Lust or love?

However, despite this strong performance Paterson tells gold is no longer on investors’ radars. Comparatively, there is a variable amount of ‘froth and excitement’ for lithium discoveries. 

“It’s a frustrating situation but all the exploration companies are in the same boat. Having said that, we have a great project so we’re not about to jump onto the lithium bandwagon for short term gain.”

Great Boulder is looking to undertake another Aboriginal heritage survey within the Ironbark Corridor on the back of recent drilling results from its Side Well Gold Project in Western Australia. 

“It’s a frustrating situation but all the exploration companies are in the same boat. Having said that, we have a great project so we’re not about to jump onto the lithium bandwagon for short term gain

The $34 million market capitalisation company received the results as part of a phase five resource expansion and definition program at both Mulga Bill and Mulga Bill North, respectively. 

Mulga Bill North displays potential as a ‘significant’ northern extension to the existing Mulga Bill resource, with mineralisation now defined over 700m of strike and remaining open in all directions. 

Flynn Gold (ASX:FG1) Chief Executive Officer (CEO) Neil Marston echoes the sentiments of Paterson. He explains to that investors have seemingly exited the gold sector, which is highlighted by the lack of liquidity in the explorer space.

“Whenever you put out some results, there becomes a bit of a liquidity event for people to trade, which is obviously frustrating for companies such as ourselves, which are producing some good results.”

In its quarterly report released yesterday (25 October 2023), Flynn notes that despite the wider issues facing the sector, it remains in a strong position with $2.527 million cash at hand as of 30 September.

On 10 October, the $8.86 million market capitalisation company reported ‘high-grade’ gold mineralisation intersected at its Golden Ridge Project, recording 1.1m @ 51.3g/t Au from 353.2m, including 0.4m @ 137.8g/t Au from 353.9m. 

Subsequent to this announcement, Flynn’s share price saw a spike, increasing from $0.055 to $0.068. Although there was a sudden climb, during mid-January 2023 Flynn’s share price was trading at $0.105 —— nearly double than what it is trading at now. 

Marston says this rollercoaster ride is indicative of the market and what most gold juniors are encountering.

“I think investors are probably not as patient as they might have been a few years ago.”

Mt Malcolm Mines (ASX:M2M) Managing Director Trevor Dixon agrees, adding that small cap companies are on a downward trend. He says valuations often do not reflect the movements of the gold price, which in May this year topped $3,073 and is today about $3,160.

“Mt Malcolm is undervalued currently. Simply because the gold price hasn’t changed, yet our market cap and share price have dropped significantly over the past 12 months.”

As Dixon notes, Mt Malcolm’s share price was trading at about $0.20 in October 2021 and today is trading at $0.022.

Great Boulder and Flynn Gold have endured a similar slide. In March 2023, Great Boulder’s share price was trading around $0.10, however, it has slipped to $0.065 despite having some wins and releasing regular positive updates to the market.

While gold has actually fluctuated from a low of $2,676 on 16 February to breach $3,100 there have not been wild swings per se – although it did dip sharply from 1 June.

According to the World Gold Council, the gold price weakened during June this year, which was predominantly due to the rise in US Treasury yields, a fall in volatility, the strength of the US dollar, alongside ensuring outflows from global gold ETFs.

The council notes price momentum and gold ETF outflows pressured the gold price, particularly in the past 2 months of the second quarter of 2023. 

Mine Life’s Wendt explains that during the first half of 2023 there was hope that inflation would soften. 

“Comments from the Fed poured cold water on these hopes, which means that gold has suffered.”

Golden rule

Despite these conditions and the lack of investors’ attention, the gold price has doubled in the past 10 years – now sitting at about $3,160 AUD, as reported in the Perth Mint’s live gold price. 

Wendt says the driving force behind the gold price rising is the “skyrocketing growth of debt worldwide, especially in the post-covid and post-GFC environments”.

However, as Riedel Resources (ASX:RIE) CEO David Groombridge explains, the strength of the gold price is not translating into higher valuations for small cap explorers.

“From my perspective in the junior space, that rise has not affected anything. It’s been a bloodbath for juniors in the exploration or developing space.

It’s been a bloodbath for juniors in the exploration or developing space

It’s made no difference at all, because you look at all the shares from all the juniors and they’ve been smashed this year and getting access to equity has been really hard.”

As previously mentioned, gold gained 12% during the first 8 months of 2023 on the back of a stellar 2022, once again outrunning other major assets. 

Could it be that gold is still attractive — but it’s explorers that have lost their appeal? 

Speaking to, The Perth Mint Manager Depository John O’Donoghue reaffirms that gold has been a ‘top performing’ asset during 2023. 

O’Donoghue says this is highlighted by the ‘positive’ returns to investor portfolios, alongside supporting dampening volatility in times of uncertainty, such as the US banking crisis in March this year — where 3 small- to mid-size US banks triggered a decline in the global bank stock prices. 

“I can say that there is evidence that central bank gold buying remains strong and near record levels, and this supports a higher gold price. 

However, a key determining factor of future gold prices will be the direction taken by the US Federal Reserve and whether they cut interest rates or whether they remain higher for longer in their quest to get inflation in line with target.”

As Great Boulder’s Paterson notes, there’s a plethora of macro issues at play boosting the gold price, however it’s a double edge sword. 

Some of these same market influences are making it harder to access capital to advance early stage assets.

In the Gold Price Forecast for 2024: What Experts and Analysts Say, UK Silver and Gold Dealer, Physical Gold CEO Daniel Fisher notes the financial world experienced severe monetary policy tightening in 2023. This was to help control runaway inflation. 

O’Donoghue says a key component in future gold prices will be the direction taken by the US Federal Reserve on interest rates. 

“Continued higher interest rates would support a stronger US dollar, which should curtail gold’s short to medium term performance. Conversely, periods of economic uncertainty, such as the US banking crisis in March 2023, support demand for gold.”

Paterson agrees: “Currently the economy (national and global) is in poor shape and access to funding is difficult, so having a good project is a key attribute for any successful junior.”

The future of gold investing is largely affected by what is going on in the world at the time. In times of turmoil, such as today with the wars in Gaza and Ukraine, investors typically turn to one safe-haven asset — gold. 

O’Donoghue says the world saw this in 2016, while the US-China trade war took place, alongside other geopolitical issues and more central bank demand, and as a result demand surged. 

“This culminated in a record high of USD $2,075 during the COVID-19 pandemic in August 2020 as recession fears and monetary and fiscal stimulus boosted prices.”

A model metal

While gold may not be as sexy as other commodities right now as the world transitions towards decarbonisation, the precious metal’s shine is likely to return sooner rather than later.

Astral Resources (ASX:AAR) Managing Director Marc Ducler describes himself as a perennial gold bull and sees the market as ‘solid’ going into 2024. He tells this news service that moving into next year, the market is likely to only get stronger.

“I am extremely bullish on gold and when we’re doing our next levels of study, we’ll probably have enough runway with the gold price to demonstrate that we can run a high price scenario again.

The gold price is, in my view, certainly going to continue to strengthen from here.”

The gold price is, in my view, certainly going to continue to strengthen from here

Astral is targeting exploration, growth, and development of its flagship Mandilla project, located 70km south of Kalgoorlie in Western Australia. Mandilla hosts a Mineral Resource Estimate (MRE) of 37Mt at 1.1g/t Au for 1.27Moz of contained gold.

A five-stage open pit design has been based on a $2,100 an ounce gold price with all-in sustaining costs (AISC) over the full life-of-mine (LoM) to average about $1,648/oz. Ducler says the three-stage crush, single-stage grind option provides the lowest capital and operating cost across Mandilla’s life-of-mine.

Mandilla is forecasted to generate an unleveraged and pre-tax IRR of 73% and an unleveraged and pre-tax NPV of about $442 million (NPV8%).

Pacgold (ASX:PGO) Managing Director Tony Schreck tends to agree with Ducler and remains optimistic regarding junior gold explorers heading into the new year. Schreck explains the investment return for small companies with ‘quality’ assets will improve.

“The gold majors and mid-tiers have progressively cut back exploration over the past 10-plus years and I see there will be greater interest from these companies viewing undervalued gold juniors with strong assets as a means of growth through M&A.”

Flynn Gold’s Marston also has high hopes as he sees companies putting in the work being rewarded for their results. 

“I think the longer that the gold price stays up at these prices, or starts to trend up further, you’ll see people taking profits out of the other sectors they’re investing in around lithium, rare earths, and uranium – which is having a run at the moment.

I think people will start coming back to add gold stocks to their portfolio, I think gold is not dead, so to speak.”

Whether gold is perceived to be sexy or not one thing appears clear – regardless of what commodity is catching the collective eye of investors, the precious metal will always be in vogue.

Write to Aaliyah Rogan at 

Images: Great Boulder, Flynn Gold, Mt Malcom
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Written By Aaliyah Rogan
Relocated from the East Coast in New Zealand to Queensland Australia, Aaliyah is a fervent journalist who has a passion for storytelling. When Aaliyah isn’t writing stories, she is either spending time with friends and family or down at the beach.