I began covering gold as an analyst back in 1998, and I’ve seldom seen a more sustained level of strength in gold over that time than I’ve seen in the last year.
Gold’s strength in this market has been nothing short of astounding, and with a number of catalysts in play, we likely haven’t seen the end of it. Clearly, gold’s bull market is being driven by much more than the normal cyclical considerations, and I think it has approached a point where we can now describe it as a secular uptrend.
Surprisingly, however, gold’s excellent showing this year has received relatively scant attention in the mainstream press despite being up 30% year to date and outpacing the gains in the S&P 500 Index (which is up by “just” 20% YTD). It’s hard to get a read on why so many news outlets are ignoring gold’s strength, although it could be attributed to the media’s obsessive concern with equity market gains due to the latter’s outsized influence on the economy.
The chief catalysts for the precious metal’s bull market involve a mix of geopolitical concerns, with an expansion of the wars in the Middle East and Eastern Europe looking increasingly likely, while worries over the U.S. political and economic outlooks are also proliferating.
What’s more, a number of geopolitical analysts believe the U.S. could even be at war with its chief economic ally, China, within the next couple of years. Last year, a four-star Air Force general predicted that the nation will be at war with China by 2025 and told his staff to “get ready” for it, according to CNBC.
On that subject, the U.S. Air Force’s Air University published a journal article in 2022 entitled, “Preparing for U.S. War with China—2025-2032.” The article explored various scenarios and strategies for a potential military conflict between the two countries. And while the topic explored by the journal was theoretical, it’s hard to ignore the assigned start date of 2025 for the potential war.
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Then there’s the ever-present threat of rising inflation. Recent Consumer Sentiment Index readings have increased concerns among American consumers that living costs will continue rising into 2025, with inflation expectations spiking in the latest release of findings by the University of Michigan.
Moreover, according to Wells Fargo economists Sam Bullard and Jeremiah Kohl, “Higher prices have remained a top concern, as 44% of consumers reported this as the primary driver of their opinion on household finances.”
With so many fears and potential conflicts swirling around the coming New Year—whether real or imagined—it’s no wonder the yellow metal has posted one of its best years in decades in 2024. Historically, gold outperforms in such a climate due to its established reputation as the ultimate safe-haven asset, and for this reason, I expect the yellow metal to remain strong well into next year.
2 Opportunities to Take Advantage of Gold’s Strength
Skeena Resources (SKE)
In terms of investment opportunities, while most gold mining stocks nowadays fall under the category of momentum plays, there are still a few turnaround opportunities within the sector. Among the late-cycle turnaround names is Skeena Resources (SKE), which is a Canadian mining exploration and development company focused on revitalizing the past-producing Eskay Creek gold-silver mine located in British Columbia’s Golden Triangle region. The company also explores for silver, copper and other precious metals.
Production is expected to begin construction in 2026, with production anticipated by the first half of 2027. Skeena expects to produce around 450,000 gold equivalent ounces (GEOs) per year for the first five years upon completion, with related production of antimony, copper and zinc.
Eskay Creek is further projected to be one of Canada’s largest open-pit gold mines, with analysts predicting it to be number three in Canada within the mine’s first five years of operation. Ore grades, moreover, are expected to nearly triple the global average of active open-pit mines.
Barrick Gold (GOLD)
Then there’s industry stalwart, Barrick Gold (GOLD), which can be categorized as a mid-stage turnaround. The company has been focused on replenishing and replacing its gold reserves rather than buying them at a premium like many of its fellow producers. This places the company on a sound footing to benefit from additional gold price strength in the coming months, and its strategy has lately attracted positive attention in the form of ratings upgrades from major Wall Street institutions.
On the financial front, analysts believe Barrick could generate over $1 billion in free cash flow (FCF) this year which, if realized, would equate to an 80% improvement from last year’s FCF. Moreover, the company is expected to generate upwards of $2.5 billion in FCF next year. And as Barrick’s cash position improves, expectations are strong for higher dividends going forward. It’s a solid story in the under-appreciated gold bull market story.
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