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Aussie gold pariahs could be the new hot stocks as the price of the precious metal notches up a fresh record

Adrian Rauso & Yvonne Yue Li
The Nightly
3 Min Read
The precious metal rose to a fresh record on Wednesday night by breaking through the $US2300 per ounce barrier to reach $US2301.2 ($3496), continuing a weeks-long rally.
The precious metal rose to a fresh record on Wednesday night by breaking through the $US2300 per ounce barrier to reach $US2301.2 ($3496), continuing a weeks-long rally. Credit: ND STOCK/stock.adobe.com

Gold is on a record run, with no signs of slowing down, and some of Australia’s most unloved gold stocks might be the biggest beneficiaries.

The precious metal rose to a fresh record on Wednesday night by breaking through the $US2300 per ounce barrier to reach $US2301.2 ($3496), continuing a weeks-long rally.

The precious metal’s price has increased by 20 per cent since the start of the year.

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The price rise has been driven by United States Federal Reserve chair Jerome Powell reiterating that it will likely be appropriate for the US to begin lowering interest rates “at some point this year”, as rampant inflation shows signs of cooling.

Mr Powell said recent inflation figures — though higher than expected — didn’t “materially change” the overall picture.

He signalled policymakers will wait for clearer signs of lower inflation before cutting interest rates. Lower rates are generally positive for gold since it pays no interest.

Gold has also been buoyed by its ‘safe haven’ status amid the ongoing Russia-Ukraine conflict and the deteriorating situation in Gaza.

Persistent tensions in the Middle East and Ukraine have bolstered the precious metal’s role as a haven asset, while central bank buying supported prices at historically high levels during the past year, despite rising interest rates.

The latest data compiled by the World Gold Council shows central banks continued adding to their gold holdings in February, albeit at a slower pace than before. They bought a net of 19 tonnes, marking the ninth straight month of growth.

On the Australian front brokers are tipping Australian Securities Exchange-listed gold miners that do not have significant price hedging in place to be the biggest beneficiaries.

Morgan Stanley’s hot picks are Perth-based Regis Resources and Sydney-headquartered Evolution Mining, who have both underperformed on the market since the onset of 2024, with the duo being part of a very small group of gold stocks to have lost share price ground in the year to date.

Regis and Evolution were both badly impacted by torrential downpours at opposite ends of the country earlier this year.

On top the operational jitters, investors gave the thumbs down to Evolution’s $603m Northparkes copper-gold acquisition in NSW and Regis’ growth project — the McPhillamys mine also in NSW — is stranded in development limbo.

Gold mining ingot yellow foundry metal manufacturing reserve process
The precious metal rose to a fresh record on Wednesday night by breaking through the $US2300 per ounce barrier to reach $US2301.2 ($3496), continuing a weeks-long rally. Credit: Agnor Mark/agnormark - stock.adobe.com

But Morgan Stanley says Regis’ fully unhedged position and Evolution’s 5 per cent hedged production give it greater exposure to the rising price than many of its peers.

For example, Northern Star Resources — the largest Australian-based gold miner on the stock exchange — has about a quarter of its production tied to hedging arrangements.

The cashflows Australia’s gold miners are set to generate could also tempt dividend-hungry shareholders across the nation to shift their funds away from iron ore producers.

In a separate research note to clients, Morgan Stanley said the days of big dividend payments from the country’s iron ore giants could be numbered.

It said tumbling iron ore prices and large capital expenditure requirements to bring new supply online in the coming years will likely underpin lower shareholder returns.

BHP is set to be the worst affected, according to the broker, due to the company’s elevated net debt position and ongoing risks posed by the legal fallout from the Samarco dam disaster in Brazil that occurred in 2015.

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