Gold prices tracked higher this week and are expected to continue making gains in 2024 as interest rates fall in the US and Central Banks abroad continue to buy up the yellow metal as a "safe haven" investment.
The gold price is forecast to rise by 6% in the next 12 months to $2,175 per ounce, according to Goldman analysts.
It is currently trading about $100 below its record-high price of $2,135 per ounce achieved in December 2023.
While gold prices are expected to be range-bound in the near term amid uncertainty about the Federal Reserve’s interest-rate policy, gold’s “safe haven” status continues to support the asset class.
Falling interest rates, big purchases by Central Banks in countries such as China and India amid geopolitical tensions, and strong retail demand are set to drive gold prices higher by the year-end, experts believe.
China’s Central Bank continues to make significant gold purchases in a bid to support its currency, U.S. Global Investors (NASDAQ:GROW) CEO Frank Holmes highlighted.
The country purchased 1,060 tons of gold from 2022 to 2023, up from 509 tons between 2016 and 2019 as it has shifted reserves away from the US dollar.
Holmes also noted that Chinese citizens were purchasing a lot of gold. Retail gold purchases have been particularly strong in the lead-up to the Chinese New Year in February as for the year of the dragon, consumers have purchased gold dragons, he said.
The Chinese are pivoting from real estate investments to gold which has outperformed the S&P 500 two to one this century, Holmes explained.
“It’s a strong asset class whenever you use modern monetary theory (MMT), and the Chinese have been aggressive in using MMT to expand their economy.
“In the second half of this year, we’ll see interest rates really start to come down and that is going to be very bullish for gold.”
A 100-basis point decline in US two-year rates will immediately boost the gold price by 3%, according to Goldman’s analysts.
On the production side, Holmes sees North America as a safe haven for gold exploration and production expansion.
“There’s a big push for strategic minerals because the Chinese have been cutting off [supply],” he said.
The expected rise in gold prices means that companies could have the potential to magnify returns, as any increase in the price of gold leads to a proportionally larger increase in profitability. With that in mind, here are a few gold-focused miners or developers that offer exposure to the rising gold prices.
Endeavour Mining PLC (LSE:EDV, TSX:EDV, OTCQX:EDVMF), which holds producing assets in West Africa, expects to see production increase by 18% in 2024 as it expands the Sabodala-Massawa mine in Senegal and the new Lafique project on the Fetekro property in Côte d’Ivoire enters production.
It expects to produce between 1.13 million to 1.27 million ounces of gold this year, after producing 1.07 million ounces of gold in 2023.
Over in Mongolia, Steppe Gold Ltd (TSX:STGO, OTCQX:STPGF) is expanding its ATO Gold Mine, which is set to increase the company’s annual production from 30,000 ounces to 100,000 ounces of gold equivalent.
The Phase 2 expansion will add 12 years to the mine life and it is expected to generate 1.2 million ounces of gold equivalent on a recovered basis over this period.
The ATO project hosts approximately 1.67 million ounces of gold equivalent. To date, it has produced more than 100,000 ounces of gold, generating $185 million in gross revenue for Steppe Gold.
Troilus Gold Corp (TSX:TLG, OTCQX:CHXMF), a Montreal-based developer, holds a significant gold resource at its Troilus deposit in Quebec, Canada.
The Troilus deposit has a gold equivalent mineral resource of 11.21 million ounces of indicated resources and 1.8 million ounces of gold equivalent in the inferred category.
Meanwhile, US Gold Corp (NASDAQ:USAU) expects to produce about 1.1 million ounces of gold from its CK Gold Project located in Wyoming.
With permit approval and a finalized feasibility study expected in the first half of 2024, the company sees the project as shovel-ready in the second half of the year.
Soma Gold Corp. (TSX-V:SOMA, OTCQX:SMAGF) expects to see record production from its Colombia projects in 2024, after reporting a 40% increase at its el Bagre Gold Complex to 32,340 ounces of gold equivalent in 2023.
It is also restarting operations at the el Limon Mill to support increased gold production at its Cordero Mine.
In Mexico, Sonoro Gold Corp (TSX-V:SGO, OTCQB:SMOFF) is developing the Cerro Caliche gold project. A preliminary economic assessment released last year showed the project to have a pre-tax net present value of $71.4 million, a pre-tax internal rate of return of 59%, and a nine-year life of mine producing 297,575 ounces of gold equivalent.
Pending the Mexican government’s federal permitting authority’s approval of its Environmental Impact Statement, the company is carrying out infill and expansion drilling which it believes will add to the overall size of the resource.