Why Canadian Gold Royalty Stocks Are Poised to Outperform the S&P 500 in 2025

The global macroeconomic landscape in 2025 is a perfect storm for gold—and Canadian gold royalty firms are sitting at the eye of it. With central banks amassing record gold reserves, geopolitical tensions inflaming safe-haven demand, and Canada-U.S. trade relations stabilizing after years of uncertainty, royalty/streaming firms like Franco-Nevada (FNV) and Wheaton Precious Metals (WPM) are positioned to outperform the S&P 500. Their valuation gaps versus traditional miners and the asymmetric upside from rising gold prices make them a rare "win-win" play in today's volatile markets.

The Macro Case: Gold's Bull Run and Central Bank Demand

Gold's trajectory in 2025 is undeniable. J.P. Morgan forecasts prices to average $3,675/oz by Q4, driven by central bank purchases (900+ tonnes in 2025) and geopolitical risks like the Israel-Iran conflict. The $3,373/oz price on June 19 is already up 30% year-on-year, and technical charts show a clear upward bias with support at $3,200–$3,250 and resistance near $3,450.

But why royalty firms over miners? Simple: royalty companies own the upside of gold's rise without bearing the operational risk. Miners like Kinross Gold (KGC) face volatile costs (energy, labor, permitting) and capital-intensive projects that can crater margins if gold dips. Royalty firms, by contrast, secure fixed-cost streams—a percentage of production or a discounted price per ounce—locking in profits even during dips.

Valuation Gaps: Royalty Firms Are Underpriced Relative to Gold's Upside

Let's dissect the math. A miner like Kinross trades at a P/E of 14x, while Franco-Nevada trades at 6x forward earnings—a stark discount despite its lower risk profile. Why? Market skepticism about gold's long-term rally and underappreciation of royalty firms' optionality.

• Discounted Gold Resources: Royalty firms own claims on gold reserves valued at a fraction of their true worth. For example, Franco-Nevada's $15 billion in gold assets are priced at just $35 billion market cap, implying a 23% discount to gold's current price. If gold hits $4,000/oz (as projected by 2026), this discount evaporates.
• Central Bank Buying: Central banks are strategic buyers, not traders. Their purchases are steady and driven by de-dollarization—not sentiment. This creates a structural tailwind for gold, unlike equities tied to equities' cyclical swings.

Canada-U.S. Trade Resolution: Removing a Key Overhang

The U.S.-Canada tariff war of early 2025 created chaos for Canadian miners, but recent trade talks are easing tensions. The removal of 25% tariffs on Canadian minerals (effective mid-2025) reduces costs for miners and opens U.S. markets again. For royalty firms, this means:
- Stabilized Supply Chains: Reduced logistical risks for their asset portfolios.
- Currency Dynamics: A weaker U.S. dollar (a long-term theme as the Fed eases rates) makes Canadian firms' dollar-denominated earnings more valuable.

Technical Patterns: A Shift from Underperformance to Dominance

Gold royalty stocks have been lagging the S&P 500 for years, but price action in 2025 suggests a turning point.

• Franco-Nevada (FNV): After a multi-year consolidation below $100/share, FNV broke above its $110 resistance level in Q2 and now trades at $125/share—a +20% gain since January.
• Wheaton Precious Metals (WPM): WPM's $55–$60 support zone has held firm, with a $65 breakout signaling a shift to an uptrend.

Compare this to the S&P 500, which faces headwinds from debt ceilings, stagnant earnings, and yield curve inversions. Gold's correlation to equities is negative, making it a hedge as the broader market stumbles.

The Investment Play: Buy the Discount, Hedge the Volatility

Go long on Franco-Nevada and Wheaton Precious Metals. These stocks offer:
1. Asymmetric Upside: A $4,000/oz gold price could boost FNV's earnings by 30%+, while miners' gains would be diluted by rising costs.
2. Lower Volatility: Royalty firms' cash flows are smoother, reducing downside risk in a market correction.
3. Trade Resolution Catalysts: Canada's pivot to Asia and U.S. market re-entry will stabilize revenue streams.

Risks to the Thesis

• Gold Slump: If geopolitical risks ease suddenly (e.g., Israel-Iran peace deal), gold could drop to $3,000/oz, pressuring all gold stocks.
• Trade Deal Delays: A prolonged Canada-U.S. tariff dispute could keep miners' costs elevated, indirectly hurting royalty firms' partners.

Conclusion: The Gold Royalty Rally Is Just Beginning

The S&P 500 is a crowded trade with diminishing returns. Gold royalty firms, meanwhile, offer a rare combination of cheap valuations, gold-linked upside, and geopolitical tailwinds. With central banks as buyers, technical charts turning bullish, and trade risks fading, now is the time to allocate to Canadian royalty stocks.

Action Items:
1. Buy FNV near $125/share with a $150 price target (50% upside).
2. Add WPM at $65/share with a $80/year target.
3. Use gold ETFs (e.g., GLD) as a hedge against broader market weakness.

The gold rally isn't just about metal—it's about a world needing safe havens. Canadian royalty firms are its best-kept secret.

Data as of June 19, 2025. Past performance does not guarantee future results.