NEM's Recent Underperformance and RBC's Tactical Buy Case: A Case for Value Re-Rating in Gold Equities

The recent underperformance of Newmont Corporation (NEM) and other gold equities has sparked debate among investors about the sector's long-term appeal. However, RBC Capital Markets' latest research suggests that this dip may represent a tactical entry point for undervalued cyclical plays, particularly in gold mining, as macroeconomic tailwinds and sector rotation dynamics align to support a value re-rating.

Gold Equities: A Cyclical Bargain Amid Macroeconomic Shifts

RBC Capital Markets has long emphasized the cyclical nature of gold mining valuations, noting that enterprise value to EBITDA (EV/EBITDA) multiples for the sector typically range between 5x and 10x over a decadeGold & Silver Investment: Strategic Allocation for Wealth^[1]. As of Q3 2025, the average EV/EBITDA for gold producers stands at 6x, while price-to-cash flow (P/CF) ratios hover around 8xGold & Silver Investment: Strategic Allocation for Wealth^[1]. These metrics suggest that gold equities are trading at a discount relative to their historical averages, even as gold prices remain elevated due to geopolitical tensions and central bank demandGold's regime change?^[2].

RBC's analysis underscores that gold's role as a safe-haven asset is evolving. Traditional drivers, such as the inverse relationship between gold and real interest rates, are losing influence, while new factors—central bank buying, inflationary pressures, and portfolio diversification—are gaining prominenceGold's regime change?^[2]. For instance, emerging market central banks have purchased over 1,000 tons of gold annually since 2022, signaling a structural shift in demandGold's regime change?^[2]. This trend, combined with sticky inflation and trade policy uncertainties, positions gold equities as a hedge against macroeconomic volatility.

Sector Rotation and the Case for Undervalued Cyclical Plays

The broader market has witnessed a rotation into sectors perceived as resilient to economic headwinds. For example, Hewlett Packard Enterprise (HPE) has seen its EV/EBITDA ratio rise to 6.14x in Q3 2025, driven by AI-driven demand in networking and cloud infrastructureHewlett Packard Enterprise Co. Financial Statements^[3]. Similarly, Sunrun (RUN), a leader in residential solar, has been upgraded to “Outperform” by RBC, with a $16 price target, citing its potential to capitalize on policy shifts like the 25D tax credit sunsetStreet Calls of the Week^[4]. These upgrades highlight a broader appetite for cyclical plays with strong cash flow generation and defensive characteristics.

Yet, gold equities remain relatively undervalued compared to peers. While HPE trades at a 6.14x EV/EBITDA and Sunrun's estimated multiple is around 8x, gold producers trade at a 6x EV/EBITDAGold & Silver Investment: Strategic Allocation for Wealth^[1]Hewlett Packard Enterprise Co. Financial Statements^[3]. This discrepancy suggests that the market is underappreciating the sector's potential for re-rating, particularly as gold prices continue to outperform traditional 60/40 portfolios during periods of economic stressGold & Silver Investment: Strategic Allocation for Wealth^[1].

RBC's Strategic Allocation Thesis

RBC's tactical buy case for gold equities hinges on two key factors: value re-rating and sector rotation. The firm argues that gold's low correlation with equities—often negative during market stress—makes it an attractive diversifier in a risk-averse environmentGold's regime change?^[2]. For instance, during the 2007–2008 financial crisis, gold outperformed both stocks and bonds, a pattern that could repeat as trade tensions and inflationary pressures persistGold & Silver Investment: Strategic Allocation for Wealth^[1].

Moreover, RBC highlights that gold mining companies are well-positioned to benefit from inflationary tailwinds. Unlike traditional equities, gold producers' cash flows are indexed to commodity prices, which have surged in 2025 due to supply constraints and central bank demandGold & Silver Investment: Strategic Allocation for Wealth^[1]. This dynamic creates a compelling case for investors seeking exposure to cyclical plays with downside protection.

Conclusion: Positioning for a Re-Rating

While NEM and other gold equities have lagged in the short term, RBC's analysis suggests that the sector is primed for a value re-rating. With EV/EBITDA multiples at historical lows and macroeconomic conditions favoring gold's role as a hedge, investors may find undervalued opportunities in gold producers. Meanwhile, sector rotation into AI-driven tech and clean energy plays like HPE and Sunrun underscores a broader market shift toward cyclical resilience. For those willing to take a contrarian stance, gold equities offer a compelling blend of defensive positioning and growth potential in an uncertain macroeconomic landscape.