Zacks
5 Gold Mining Stocks to Watch as Industry Prospects Look Bright
Madhurima Das
10 min read

In This Article:

The prospects for the Zacks Mining - Gold industry look bright, backed by the 26% growth seen in gold prices in 2024. The bullion is expected to end the year at around $3,000 an ounce, supported by geopolitical tensions and central bank buying.

With gold prices expected to increase further on demand-supply imbalance, companies like Agnico Eagle Mines AEM, Franco-Nevada Corporation FNV, Kinross Gold KGC, Equinox Gold EQX and Gold Royalty GROY are well-poised to capitalize on this, backed by their strong balance sheets, efforts to lower costs and growth initiatives.



About the Industry

The Zacks Mining - Gold industry comprises companies engaged in extracting gold from mines. These mines may either be underground or open pits. Mining is a long and complex process and requires significant financial resources. It involves exploring to evaluate a deposit's size; assessing ways to extract and process ore efficiently, safely and responsibly; and developing the mine before the actual mining process. It usually takes 10-20 years for a gold mine to produce material that can finally be refined. Nowadays, industry players use a range of sophisticated techniques to extract gold and convert it into dore bars, an alloy of gold and silver, alongside other impurities. These are then sent for purification, after which gold is purchased as bars or coins, or used in jewelry or other purposes.

Major Trends Shaping the Future of the Mining-Gold Industry

Solid Trend in Gold Prices to Drive Industry Growth: Gold prices gained 26% in 2024, surpassing the performance of most major asset classes. The rise is the highest gain recorded by the bullion in 14 years. Gold even hit an all-time high of $2,748.23 in October. Several factors have contributed to this solid performance in 2024, including heightened geopolitical tensions, interest rate cuts and central bank purchases. This momentum is expected to continue in 2025, with gold prices likely to be supported by ongoing geopolitical uncertainty and concerns over President-elect Trump’s agenda, specifically regarding tariffs. Analysts expect gold prices to scale to around $3,000 an ounce by the end of this year, backed by solid demand amid limited supply prospects.

Efforts to Counter High Costs to Sustain Margins: The industry has been facing a shortage of skilled workforce, causing a spike in wages. Industry players are grappling with escalating production costs, including electricity, water, and material and supply-chain issues. Since the industry cannot control gold prices, it focuses on improving the sales volume and the operating cash flow, as well as lowering unit net cash costs. The industry participants are opting for alternate energy sources, such as solar or wind farms, to minimize fuel-price volatility and secure supply. Miners are committed to cost-reduction strategies and digital innovation to drive operating efficiencies.

Demand & Supply Imbalance to Support Prices: Depleting resources, declining supply in old mines and the lack of new mines have been inherent threats to the industry. Due to the scarcity of discoveries and exhaustive existing resources, miners prefer building up reserves through acquisitions rather than digging new ones that are risky and capital-intensive. On the demand side, the use of gold in energy, healthcare and technology is rising. India and China account for around 50% of consumer gold demand. Gold demand in India will remain strong on improving economic momentum and consumer confidence. The yellow metal has long been considered a safe-haven investment amid financial or political uncertainty. Central banks have been ramping up reserves held in gold due to currency depreciation and geopolitical and economic risks. Therefore, there will be an eventual demand-supply imbalance, which will likely drive gold prices.

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