Macro Intelligence: what is the potential for Australian gold prices amid geopolitical shifts?

Article written by Juliette Saly (ausbiz) | Presented by Kylie Merritt (ausbiz)

Spotlight on the gold sector

In this week’s edition of IG Macro Intelligence, we examine the gold sector.

Going for gold

Gold has a lot going for it right now.

Safe-haven demand stemming from ongoing tensions in the Middle East is bolstering prices. Uncertainty around the US Presidential election is also boosting bullion demand as opinion polls show the race to the White House remains tight.

A favourable macro backdrop for gold is attracting more investors. Global rate cuts can continue to support the non-yielding bullion until there is more certainty about the duration of the rate reduction cycle and its endpoint. The need for portfolio diversification is driving investment inflows into gold, as wary investors eye rising US public debt over the long term, systemic risks in global financial markets, and a possible correction in richly priced equities.

In the meantime, mine production is on track to hit a record in 2024 and recycling is expected to rise by 5%. Central banks remain net buyers of gold, but the pace of purchases has slowed down.

Spot gold (A$1 contract) four-hour chart

Navigating currency dynamics and political influences

That being said, gold has rallied despite a recent run of gains for the US dollar as data keeps interest rate expectations for the Federal Reserve in check. The dollar has also benefited from a rise in market expectations for a victory next month by the former US President Donald Trump, which would likely bring about inflationary policies such as tariffs.

“If either party wins, they're both going to spend more and that's going to help gold out,” Jonathan Tacadena from MPC Markets recently told ausbiz. “I think stay long, stay invested.”

Foreign exchange reserve accumulation in BRIC nations

Gold's price outlook amid global trends

After rising more than 32% in 2024 so far, the psychological $3,000 is the target being bandied about by many analysts.

Citi recently reiterated its bullish gold view, saying it continues to see upside to $3,000/oz for gold over the next six to twelve months. It says the fundamentals support its view, in addition to the expectations for Fed cut-related ETF buying. However, Citi says the price path is unlikely to be linear given geopolitical tensions, US election uncertainty and the risk of the Fed falling behind on rate cuts.

“In the shorter term, you can't rule out a bit of a pullback considering the rally we've had, but it still looks fundamentally quite strong over the medium to longer term,” ANZ Bank’s senior commodities strategist Daniel Hynes recently told ausbiz.

De-dollarisation is also being touted by some as a major driver for the gold price. Recent IMF data shows the US dollar's share of global foreign exchange reserves has fallen to a 29-year low of around 58% as of Q2 2024.

Against a backdrop of record-high gold prices, jewellery consumption has suffered losses. Demand in India ticked up ahead of the Diwali festival, but record-high prices discouraged many retail buyers from making their usual festive purchases.

US dollar index and global FX reserve share (2000-2020)

All that glitters

The three largest gold miners by market capitalisation listed on the S&P/ASX 200 are Newmont, Northern Star, and Evolution Mining. Unsurprisingly, there has been some profit-taking in these stocks recently, and while the gold price has been minting fresh record highs, Australian gold producers have been releasing quarterly production reports. The operational updates serve as a good reminder that stocks don’t necessarily follow the gold price higher.

• Newmont (ASX: NEM)

Take Newmont (ASX: NEM) as an example, which posted disappointing production numbers. Management also flagged lower production in calendar 2025 than contained in its previously released five-year outlook. Macquarie says while the update was clearly negative, it views the sell-off as “a little overdone,” calling Newmont “still the global go-to name for gold leverage.” It has an ‘Outperform’ rating on the stock, with a price target cut to $80.00 in the wake of the report.

Newmont daily chart

Citi also called the third-quarter update “disappointing,” including the forecast for underlying costs in 2025 to be near flat, rather than down. It has a ‘Buy’ rating on the stock with a $95.00 price target.

Market sentiment for Newmont

• Northern Star Resources (ASX: NST)

Northern Star (ASX: NST) also saw its share price slip in the wake of its quarterly update. It reported gold sales of 394,000 ounces at an all-in-sustaining cost (AISC) of $2,082/oz. Northern Star kept its FY25 outlook unchanged. Macquarie called the update mixed, with sales meeting consensus and 2% above Macquarie’s forecast. However, production was lower than expected and costs slightly higher. It has an ‘Outperform’ rating on the stock and a price target of $20.00.

Northern Star Resources daily chart

Citi left its earnings estimates unchanged after the update, with a ‘Buy’ rating and $18.30 price target maintained.

Market sentiment for Northern Star Resources

• Evolution Mining (ASX: EVN)

Evolution Mining’s (ASX: EVN) quarterly report was strong with FY25 guidance maintained. Production and costs were in line with consensus, with Red Lake generating good cash flows and the company highlighting plenty of growth and projects ahead. Macquarie raised its price target on the stock to $4.60 in the wake of the report; however, it downgraded Evolution to ‘Neutral’ from ‘Outperform’ based on share price strength.

Evolution Mining daily chart

Citi says Evolution Mining remains its preferred ASX gold exposure following September quarter results and the reiteration of its FY25 group production guidance. It has a price target on the stock of $5.10 and a ‘Buy’ recommendation.

Market sentiment for Evolution Mining