The US-Iran conflict has dampened hopes of gold reaching another record high this year, as investors viewed the metal as a riskier hold amid a high-inflation, potentially high-interest-rate environment.
After climbing about 60% through 2025 and then hitting an all-time high in January, gold has retreated nearly 25% to around US$4,000 ($5,719) per ounce.
Higher oil prices resulting from the conflict have raised inflationary pressures, prompting central banks to keep interest rates higher for longer — a headwind for the non-yielding metal.
The shift in outlook has prompted major banks to lower their year-end gold forecasts. JPMorgan and Bank of America have both tempered earlier, more ambitious expectations.
In Europe, UBS and Deutsche Bank have also turned more cautious after previously forecasting much higher prices.
Bull market intact
Despite gold’s recent pullback, long-term sentiment toward the metal remains largely positive.
Strong central bank buying continues to support the gold market, although uncertainty surrounding the conflict in the Middle East has made it difficult to predict when the next leg of the rally will begin.
Billionaire hedge fund manager John Paulson is not too concerned, believing that gold is still in the early stages of a long-term bull market.
“As people lose faith in paper currencies, gold as an alternative will continue to grow,” Paulson told CNBC in a recent interview.
He also believes investors stand to benefit more from owning gold miners than bullion itself, particularly companies with large undeveloped gold resources.
Paulson’s comments came as his firm completed a transaction with NOVAGOLD Resources (TSX:NG) to combine their interests in the Donlin Gold Project in Southwest Alaska, one of the largest undeveloped gold deposits in the US. The transaction has established a new company valued at about US$4.2 billion.
“I think the greatest way to invest is to invest in early-stage gold stocks,” Paulson said.
Nevada remains a hotspot
Paulson’s comments reinforce the bull case for junior gold explorers, particularly those operating in established mining jurisdictions such as Nevada.
The US state has produced more than 200 million ounces of gold and is ranked by the Fraser Institute as the world’s most attractive mining jurisdiction. While Nevada already hosts several of the world’s largest gold mines, large areas remain underexplored, particularly away from the state’s historic mining corridors.
Maverick Gold & Silver (CSE:MAV) is preparing drilling on two projects. Its flagship Gator Project lies near the famous Battle Mountain trend, close to Nevada Gold Mines’ Phoenix operation and the former Cove-McCoy mine now held by I-80 Gold (TSX:IAU). In Lincoln County, Maverick also controls the Jericho property.
Maverick says Nevada is supported by “reliable power infrastructure, skilled mining labour, established service providers, and proximity to major processing facilities”, advantages that enable it to advance projects more efficiently and at lower capital costs compared to many emerging mining regions.
Further north, Provenance Gold (CSE:PAU) is exploring the White Rock Project in Elko County, where drilling has outlined a large gold system extending over at least 3.2km by 1.6km. The company’s largest asset is the district-scale Eldorado Project in neighbouring Oregon, where it has highlighted ‘high-grade’ gold mineralisation from last year’s drilling.
Underexplored Brazil
Some explorers are looking beyond North America for the next major discovery.
Stockworks Gold (TSX-V:STW) is advancing the Pirenópolis Gold Project in Goiás, Brazil, a country the company believes is “one of the most underexplored gold jurisdictions in the world.”
Gold was first discovered in the region during the 1720s, but exploration remained limited for much of the country’s history.
Brazil only allowed full foreign ownership of mineral rights from 1988, helping explain why some prospective regions have seen limited exploration than established markets in North America and Australia.
This shows that attractive gold exploration opportunities still exist well beyond the world’s traditional mining districts. Should Paulson’s bull market thesis play out, investors in early-stage explorers could see better days ahead.
Write to Jackson Chen at Mining.com.au
Images: Maverick Gold & Silver
