Historic all-time high in gold price fuels gold mining stocks

On September 13, 2024, the gold price reached a new historic high of 2,580.56 USD per troy ounce. This impressive increase reflects the combination of several macroeconomic and geopolitical factors that strengthen confidence in gold as a safe haven investment approach. Among the four most important factors are the interest rate cut by the European Central Bank, current inflation data from the US, a possible imminent interest rate cut by the Fed, and the decline in US Treasury yields.

European Central Bank (ECB) interest rate cut on September 12, 2024

On September 12, 2024, the European Central Bank cut its deposit rate by 25 basis points to 3.75%. This decision followed a reassessment of the economic conditions in the eurozone. Inflation remains stubbornly high, which is why the European Central Bank is seeking to support growth and reduce inflationary pressure by easing monetary policy. According to the European Central Bank's forecast, inflation will be 2.5% in 2024, before falling to 2.2% in 2025 and 1.9% in 2026.

This interest rate cut had an immediate impact on the gold market. The euro weakened against the US dollar, making gold more attractive to buyers outside the eurozone. Investors worldwide sought out investments that offered them stability and protection against inflationary risks in response to the interest rate cut, which further pushed up the price of gold.

Publication of inflation data in the US

On September 11, 2024, inflation figures for the month of August 2024 were released in the US. The consumer price index (CPI) rose by 0.2% month-on-month, in line with expectations. However, core inflation, which excludes volatile items such as food and energy, rose by 0.3%, which was slightly above expectations of 0.2%. These figures raised concerns that inflation may be more persistent than initially expected. Of particular concern is that core inflation is above the Fed's target. This has led to speculation that the US central bank may cut interest rates to stimulate economic growth and control inflation.

Fed speculation over interest rate cuts

Based on the latest inflation data in the US, expectations are growing that the Fed will cut its key interest rates by 25 basis points at its next meeting. Markets are heavily focused on this decision as the rate cut could reduce the cost of investment while also making gold more attractive as a non-interest-bearing investment. The Fed has signaled that it is prepared to take further action against inflation if needed, while supporting the economic recovery. This expectation pushed the gold price further higher in recent days, as investors saw gold as a hedge against the possibility of further monetary easing.

Falling US Treasury yields

In line with expectations of the Fed lowering rates, US Treasury yields fell significantly in the week to September 13, 2024. The 10-year Treasury bond fell by about 20 basis points to 3.67%. This significant reduction in yields led to gold becoming more attractive as an asset class, as it does not generate income compared to interest-bearing investments such as bonds, but is valued as a safe investment in times of falling interest rates. This decline in yields led to increased demand for gold and supported the rise to the new record high.

The recent record rise in the price of gold has significantly boosted the share prices of leading gold mining companies. These price gains reflect the continued strong demand for the precious metal, which is being fueled by favorable market conditions and macroeconomic factors. The following are the major players and how their stocks have performed in the wake of the recent price rise.

Top Performing Gold Mining Companies of 2024

The top gold mining companies of 2024 are the following groups, which dominate the market in terms of production, expansion strategies and ability to capitalize on high gold prices:

• Newmont Corporation: As the world's largest gold mining company, Newmont produced an impressive 172.3 tons of gold in 2023. The company operates in numerous countries, including North and South America, Australia, and Africa. Its 2023 merger with Newcrest Mining significantly expanded its production capacity. This strategic acquisition not only increased Newmont's global reach but also strengthened its position as a market leader. The company is particularly benefiting from the current high gold prices, which is having a positive impact on profit margins and share performance.

• Barrick Gold: Barrick Gold is the second largest gold company in the world. It recorded a production volume of 126 tons of gold in 2023. Barrick has further consolidated its position in the market through strategic mergers and acquisitions such as the takeover of Randgold Resources and the Nevada Gold Mines joint venture with Newmont. In particular, the Nevada project, which is considered one of the most productive gold mines in the world, contributes significantly to the company's success. Barrick benefits from its geographic diversification and strong presence in key production regions.

• Agnico Eagle Mines: Agnico Eagle Mines is one of the leading gold producers and has consolidated its position through solid production growth. The company operates mines in Canada, Finland and Mexico. The exact production volume for 2023 is approximately 80 tons. Agnico Eagle is known for its efficient and environmentally conscious operations and continuous expansion into high-yield projects, which gives it an additional advantage in times of rising gold prices.

• Coeur Mining: Coeur Mining achieved a total production of 317,671 ounces of gold and 10.3 million ounces of silver in 2023. The company operates significant projects such as the Rochester mine in Nevada, which contributed to the record figures through an expansion in the fourth quarter. Coeur plans to further increase production capacity in 2024 with the full commissioning of new facilities, particularly through optimizations in the crushing and processing of ore.

• New Gold Inc.: New Gold was able to produce a total of 423,517 ounces of gold equivalent in 2023. The company's main projects, which consist of the Rainy River mine in Ontario and the New Afton mine in British Columbia, posted solid results through continuous efficiency improvements and process optimizations. The company has increased its capital expenditure in recent years to improve mine infrastructure, which helped to increase production capacity.

• Harmony Gold: Harmony Gold produced approximately 1.48 million ounces of gold in 2023, remaining one of the largest gold companies in South Africa. In addition to its South African mines, Harmony Gold also operates successful projects in Papua New Guinea, which have contributed significantly to production. The company continued to invest in the optimization of its existing mines and plans to continue exploration and development of new deposits.

Analysis of the recent performance of these companies

The gold mining companies presented have benefited from the significant macroeconomic changes in recent days. The gold price peak of 2,577.98 USD per fine ounce reached on September 13, 2024 also had an immediate impact on the share prices of the major gold producers.

• Newmont Corporation: Newmont, the world's largest gold company, was able to achieve a moderate price increase of 9.3% by September 13, 2024. Despite the massive gold price increase in the last few days of September, the share performance was rather stable, due to increased production costs and short-term operational challenges such as labor strikes in some regions. The biggest positive driver for Newmont remains the strategic acquisition of Newcrest Mining, which allowed the company to expand its production capacity. Particularly in the last few trading days, Newmont benefited from the appreciation of the gold price, even though the price gains remained limited due to internal challenges.

• Barrick Gold: Barrick Gold achieved a price gain of 8.1% up to September 13, 2024. The global group benefits greatly from its diversification in several markets. These include in particular the Nevada Gold Mines Joint Venture, which is one of the most productive gold mining projects in the world. However, rising energy costs and geopolitical uncertainties in Africa weighed on the company's performance, dampening the share price increase compared to smaller producers. However, Barrick's shares have performed positively again in recent days due to the rise in the price of gold.

• Agnico Eagle Mines: Agnico Eagle Mines recorded a price increase of 12.7% up to September 13, 2024. The company is considered one of the most stable gold producers worldwide thanks to its low all-in sustaining costs (AISC), which are around 1,190.00 US dollars per troy ounce of gold. Solid operational efficiency, particularly at its Canadian and Finnish gold mines, and the successful acquisition of Yamana Gold have strengthened investor confidence in Agnico Eagle Mines. Recent developments in the gold market, driven by global uncertainties, have further stabilized Agnico's stock in recent days.

• Coeur Mining: Coeur Mining is one of the year's most outstanding performers, having seen its share price skyrocket 146.59% through September 13, 2024. The expansion of the Rochester mine in Nevada and the significant increase in production capacity drove this exceptional performance. In the last few days of trading in particular, investors reacted extremely positively to rising gold prices, which further fueled demand for Coeur Mining shares. The company's diversification into silver projects also helped strengthen the share price and cushion fluctuations in the gold price.

• New Gold Inc.: New Gold experienced an impressive 136.79% increase in its share price by September 13, 2024. Efficiency improvements at the Rainy River and New Afton mines, as well as production process optimization, contributed to this exceptional performance. Investors responded positively to the strong operating results and improved profit margins, which were further supported by the recent rally in the gold price. Market developments in recent days have further strengthened the value of the stock.

• Harmony Gold: Harmony Gold recorded a price increase of 131.89% up to September 13, 2024. The company's solid production in South Africa and successful expansion into Papua New Guinea were key factors in its strong growth. The company's investments in new projects and increased demand for gold in uncertain markets have further boosted the stock in recent trading days. In particular, the production increases in new markets provided additional stability to the share price performance.

Overall, the current performance of the leading gold mining companies reflects the impact of recent macroeconomic events, which have been triggered in particular by interest rate cuts and the record gold price. On the one hand, the companies were able to benefit from the increased demand for gold and the strategic operational measures. On the other hand, however, significant differences in performance can still be seen, influenced by factors such as production costs or regional challenges. Overall, their success shows how well-positioned companies can benefit from the sustained rise in the price of gold.

Reaction of gold mining stocks to the rising gold price

The rapid rise in the price of gold to 2,577.98 USD on September 13, 2024 has had a significant impact on the shares of major gold mining companies. While the gold price had been rising steadily for months due to macroeconomic developments, the last few days have seen a particularly strong upturn, which was reflected in gold mining stocks. This correlation arises from improved operational leverage: as soon as the gold price rises above certain production costs, the mining companies' margins improve disproportionately, driving up stock prices.

Most gold miners, but particularly Newmont, Barrick Gold, and Agnico Eagle, benefited strongly from this dynamic. The reason for this lies in the leverage between gold prices and production costs: as long as all-in sustaining costs (AISC) remain relatively stable – at around 1,190.00 USD per troy ounce for Agnico Eagle, for example – earnings per ounce produced rise disproportionately as soon as the market price of gold far exceeds production costs. Companies with lower production costs or more efficient operations thus achieve particularly high profit margins.

Investors who previously invested primarily in physical gold have increasingly come to view gold mining stocks as growth stocks due to higher gold prices. Gold mining companies not only offer direct exposure to the price of gold, but also growth opportunities through operational expansion and efficiency gains. This was particularly evident in companies such as Coeur Mining and New Gold, whose share prices have risen by more than 146% and 136% respectively in the current year, due in particular to production increases and efficiency improvements in their mining projects.

However, not all gold mining companies responded equally strongly to the rise in the gold price. While companies with increasing production and efficiency, such as Harmony Gold, recorded particularly high share price gains, larger groups such as Newmont and Barrick were only able to achieve moderate share price increases of 9.3% and 8.1% respectively due to higher cost increases and operational challenges. This shows that gold mining companies benefit when they can control their production costs and take advantage of price increases.

Production costs in the gold mining sector have been steadily increasing in recent years. In 2024, all-in sustaining costs (AISC), which include total operating costs and long-term capital expenditure to maintain mine production, rose to new highs. In the first quarter of 2024, AISC for large gold producers reached an average of approximately 1,439 USD per ounce, representing a year-over-year increase of 10%. This represents a significant drag on corporate profitability, particularly in the face of global uncertainty and inflation trends, driving up the costs of key inputs and operating processes.

The main drivers of the cost increases can be seen in particular from the following determinants:

• High fuel costs: The rising fuel prices worldwide are one of the biggest cost drivers for gold mines. Between 2021 and 2024, fuel costs rose by 22%, which particularly affects mines with open-cast operations that rely on diesel-powered trucks and heavy machinery. Global energy prices, which are influenced by geopolitical tensions such as the war in Ukraine, have also increased operating costs. These costs are expected to remain high in the near future.

• Inflation and material costs: General inflation has also pushed up the prices of other raw materials such as steel, explosives and cement. These material costs are essential for mining, as they affect daily operations as well as maintenance and expansion of mines.

• Labor costs and technological requirements: labor shortages in certain regions and rising wages have also increased overall costs. In addition, many mining companies are increasingly investing in automation and technological upgrades to increase efficiency and reduce costs in the long term. However, these investments are associated with high short-term expenses, which further increases operating costs.

• Low ore grades and more complex mining projects: Many gold mines are confronted with the problem of declining ore grades in existing mines. This requires larger amounts of rock to be processed to extract the same amount of gold, which further increases production costs. In addition, geographically remote mining projects with difficult environmental conditions make mining more difficult and drive-up costs.

In the face of these rising costs, gold mining companies are under pressure to optimize their operations in order to remain competitive. Many mine operators are forced to implement cost-cutting measures, such as the increased use of renewable energies or the implementation of modern technologies for process automation and efficiency improvements.

While rising gold prices have helped to stabilize margins in the short term, the long-term viability of these companies remains uncertain if costs continue to rise and global uncertainties persist. Investors are increasingly focusing on those gold mining companies and their shares that keep their production costs under control while increasing the efficiency of their mines in order to remain competitive in a volatile market environment.

The ongoing cost increases and challenges in the gold mining sector will have a decisive impact on the investment decisions of many companies in the coming years. In view of the increasing complexity of projects and the growing importance of sustainability and environmental requirements, gold mine operators must take a strategic approach to ensure their long-term profitability.

In an increasingly volatile market environment, investors need to rethink their strategies to minimize risk while taking advantage of opportunities. Gold and gold mining stocks offer different advantages in this context. A targeted combination of both investment forms can help to hedge portfolios while benefiting from rising precious metal prices. Some strategies for investors who consider gold and gold mining stocks to be an integral part of their investment strategy are analyzed below.

• Diversification between physical gold and gold mining stocks: A proven strategy is to maintain a balanced ratio of physical gold and gold mining stocks in the portfolio. In this case, physical gold serves as a stable store of value that increases in value in times of crisis. In contrast, gold mining stocks offer the opportunity to benefit from rising corporate earnings. However, this requires that production costs remain stable or decrease. This dual strategy not only protects against currency risks and inflation, but also allows investors to benefit from positive developments in the gold mining sector.

• Focus on companies with solid financials and projects: Not every gold mine benefits equally from rising gold prices. With this in mind, investors should focus their investments on companies with strong balance sheets, solid production costs and clear growth strategies. Mining companies that manage their production costs efficiently while investing in profitable projects offer higher earnings potential. For example, Agnico Eagle Mines and Barock Gold are investing in promising new gold mines while generating robust cash flows.

• Investing in gold mining ETFs to diversify risk: Another effective strategy is to invest in gold mining ETFs. These offer broad diversification across several companies in the gold sector, which lowers the risk associated with individual stocks. Gold mining ETFs also enable investors to benefit from the general trend in the gold market without being directly dependent on the performance of a single company. In a volatile market environment, they offer an attractive opportunity to invest more broadly in the gold sector.

• Taking timing and market cycles into account: A strategic decision for investors is to choose the right time to enter the gold and gold mining stocks. While physical gold is always considered a safe haven in times of crisis, gold mining stocks offer higher return opportunities in phases of economic recovery or when the price of gold rises over the long term. Investors should be careful to buy in times of lower gold prices or after periods of high volatility in order to benefit from the upward movements in the cycle.

• Hedging against specific risks: Gold mining stocks also offer the opportunity to benefit from geopolitical or regional crises that affect the gold market. Gold mining companies that operate in politically stable regions and demonstrate a diversification of their production sites offer investors an additional hedge against regional risks. Strategic investments in such companies can help to minimize systemic risks while benefiting from the advantages of global demand for gold.

For investors, physical gold and gold mining stocks offer a range of options for hedging against inflation, currency devaluation and geopolitical uncertainty. The combination of physical gold as a safe store of value and gold mining stocks as a growth-oriented form of investment enables flexible and strategic hedging in volatile markets.

Gold mining stocks are facing exciting developments in 2024, influenced by a combination of economic uncertainties, geopolitical tensions and monetary policy measures. The key factors shaping the coming months are likely to be interest rate cuts, inflation outlooks, geopolitical risks and demand for gold driven by central bank purchases.

The expected interest rate cut by the US Federal Reserve (Fed) in the coming weeks should further strengthen the attractiveness of gold and gold mining stocks. Interest rate cuts lead to a weaker US dollar, making gold cheaper for international investors. This increases the pressure on bonds and other interest-bearing investments, which in turn increases the value of gold as an investment. Gold mining companies benefit directly from this dynamic, as profit margins rise as gold prices rise, while their production costs remain stable.

Analysts predict that the price of gold will remain above 2,500.00 USD per troy ounce until the end of 2024, which bolsters confidence in gold mining stocks. Those gold mining companies that continue to manage their production costs well will benefit particularly in this environment. The gold mining company Agnico Eagle Mines, with its low all-in sustaining costs (AISC) of around 1,190.00 USD per troy ounce of gold, therefore remains an important player in the gold mining sector.

Another important driver for gold mining stocks is the current geopolitical uncertainty. Conflicts in the Middle East or Eastern Europe increase the demand for gold as a safe investment. Central banks have significantly increased their gold purchases in 2024 to hedge against currency devaluation and global risks. These include, in particular, the central banks of emerging markets such as China and Russia. These purchases not only support the gold price, but also provide gold mining companies with a stable demand base.

Despite the positive outlook, there are also risks that could impact the growth of gold mining companies. Among the biggest challenges are rising production costs, which can be triggered in particular by higher energy prices and commodity inflation. Gold mining companies operating in politically unstable regions could also have difficulties in securing constant production volumes. Nevertheless, companies with good cost management, such as Barrick Gold, offer good potential for solid returns.

Experts believe that the price of gold could continue to rise in 2025 if the current economic uncertainties persist. In the event that central banks continue to pursue expansionary monetary policies and geopolitical tensions increase, a timely breach of the 2,600.00 USD per troy ounce mark for gold could become a reality. Gold mining companies with efficient and stable production are therefore well positioned to benefit from these market conditions.

Overall, the current market dynamics offer excellent growth opportunities for gold mining companies, driven by rising gold prices, low interest rates and growing global uncertainty.