Gold Mining Stocks: A Golden Opportunity Amid Record Prices and Undervalued Valuations

The price of gold has surged to historic highs, hitting $3,500/oz in April 2025, fueled by geopolitical tensions, inflation, and central bank demand. Yet, gold mining stocks have lagged behind the metal's rise, creating a rare value opportunity. Companies like Newmont (NEM) and peers in the IBD 50 list are trading at discounts to historical valuations, even as macro forces align for a potential $4,000/oz milestone. This article explores why now is a compelling entry point for investors.

The Undervalued Case for Newmont (NEM)

Newmont's stock has surged 44% year-to-date through June 2025, yet its valuation remains attractively low. As of June 5, its Price-to-Sales (P/S) ratio is 1.67, below its 13-year median of 2.89 and significantly lower than the sector median of 2.01. This undervaluation persists despite Newmont's robust revenue growth—its trailing twelve-month (TTM) sales per share rose to $17.24 by March 2025, up 22.8% annually.

The disconnect between Newmont's stock and gold's price reflects market skepticism. Investors are pricing the stock for a $1,900/oz gold environment, not the current $3,320/oz reality. This gap suggests significant upside if valuations normalize.

Macro Drivers: Gold's Bull Run Is Just Beginning

1. Central Bank Buying: Central banks purchased 1,037 tonnes of gold in 2024, the second-highest on record. With global reserves diversification a priority, demand is structural, not cyclical.
2. Geopolitical Tensions: Escalating US-China trade disputes and Middle East instability are pushing investors toward safe havens.
3. Dollar Weakness: The Fed's cautious rate stance and inflation risks are weakening the dollar, gold's traditional inverse correlation.
4. Supply Constraints: Mine output is stagnant, while demand from ETFs and tech sectors is rising. JPMorgan forecasts a 500-tonne supply deficit in 2025, supporting prices.

At $4,100/oz, gold mining stocks could see EBITDA expand by 40–50%, unlocking share price gains of 60–100% for top miners.

Strategic Plays: IBD 50 Miners Offer Even Better Value

While Newmont is undervalued, select IBD 50-listed miners are even cheaper:
- Fresnillo (FRES.L): Trading at 5.5x EV/EBITDA vs. a sector average of 8x, with an 8% free cash flow yield. Its Mexican operations are low-cost, and production is set to grow by 15% by 2026.
- Hochschild Mining (HOC.L): At 2.8x EV/EBITDA on 2026 forecasts, it aims for 50% production growth by 2028, with diversified geopolitical risk exposure.
- AngloGold Ashanti (AU): A 20% NPV upgrade from reserve updates supports its $58 price target (35% upside from June lows).

These companies offer operational leverage to rising gold prices, with free cash flows and production growth profiles that could outperform the sector.

ETFs: GOAU Tracks the Sector, but at a Premium

The U.S. Global GO GOLD ETF (GOAU) has delivered a 52.2% YTD return through May 2025, outpacing gold's 18% gain. However, its price-to-book ratio of 2.1x reflects a premium to its NAV. While it offers broad exposure to royalty firms (e.g., Wheaton Precious Metals, Franco-Nevada), investors should consider its higher volatility (32.4% annualized) and expense ratio (0.60%).

For investors seeking pure equity exposure, selecting undervalued miners directly may offer better risk-adjusted returns.

Risks to Consider

• Gold Volatility: Short-term dips could pressure stocks, but fundamentals remain bullish.
• Operational Risks: Labor strikes or cost inflation could erode margins.
• Regulatory Uncertainty: Environmental policies or tax changes may impact profitability.

Conclusion: A Rare Entry Point Before $4,000/oz Gold

Gold mining stocks are undervalued relative to gold's historic highs and JPMorgan's $4,100/oz forecast. Newmont's P/S ratio and the IBD 50's low multiples create a compelling risk-reward profile. For investors seeking exposure:
1. Core Position: Buy Newmont (NEM) for its scale and diversified assets.
2. Growth Plays: Add Fresnillo (FRES.L) or Hochschild (HOC.L) for leverage to production growth.
3. ETF Exposure: Use GOAU for broad diversification, but monitor its valuation premium.

The confluence of rising gold prices, central bank demand, and undervalued equities suggests this is a pivotal moment. As gold inches toward $4,000/oz, now is the time to act.

With all-in sustaining costs at $1,200–$1,400/oz, miners stand to profit handsomely if gold continues its ascent. The next leg of this bull market could leave undervalued stocks far behind the metal's gains—investors who act now may secure outsized returns.