Favourite ASX-Gold Exposures

This story features GOLD ROAD RESOURCES LIMITED, and other companies. For more info SHARE ANALYSIS: GOR

The company is included in ASX200, ASX300 and ALL-ORDS

By Rudi Filapek-Vandyck, Editor

The ‘Trump Dump’, ‘Trump Slump’ or whatever term you like to use for it (“sheer idiocy” is also allowed) has undeniably revived investor interest in safe haven gold.

My personal preference is to have exposure to the metal rather than through gold producers and explorers as history time and again reveals this is the lower risk option.

Apart from specific currency risks (AUD versus USD) and moves in the all-important bond markets, gold carries no company-specific risks and have recent years not thrown up plenty of risks for gold miners on the ground!

The basic proposition is as follows: if you invest in gold stocks rather than in gold or a gold derivative, your reward can be significantly higher in the good times and significantly lower in the not so great times.

There’s no ‘right’ or ‘wrong’ here. Horses for courses. One has to know one’s own risk appetite, strategy and investment horizon.

The underlying trend for gold priced in USD continues to be pointing upwards and analysts have been upgrading their lagging forecasts, with expectations for ongoing gains building. Share prices for gold producers generally are implying a lower price for bullion, i.e. they are trading at a discount against the metal.

You know investor interest is on the rise when a recent outlook report by analysts at Citi carries the title: “A once in a 40-year gift for gold producers”.

So, there’s a valid logic to add exposure to portfolios.

The FNArena-Vested Equities All-Weather Model Portfolio habitually owns an allocation to gold — as insurance for when calamity arrives. Back in 2020 when the global pandemic caused societies to lock down, the portfolio’s allocation exceeded 10% (in addition to a rather large cash holding).

Today’s allocation is around 7%, and that includes a recent top up as global risks were on the rise since ‘Trumpty Dumpty’ was hellbent on starting a Trade War with just about everyone outside of Russia.

So let’s start with gold, the metal. Probably the easiest way to add exposure is through Exchange-Traded Funds (ETFs) listed on the ASX.

These ETFs provide exposure to either physical gold or gold mining companies, offering diversification and convenience without the need to store physical bullion. 

Physical Gold ETFs

These ETFs are backed by physical gold, allowing investors to track the price of gold directly.

Global X Physical Gold (ASX: GOLD)

-Backed by physical gold stored in a London vault by JPMorgan Chase.

-Unhedged, meaning returns can be influenced by currency fluctuations between the Australian Dollar (AUD) and US Dollar (USD).

-Management fee: 0.40%.

-Assets under management: $4.48bn.

Perth Mint Gold (ASX: PMGOLD)

-Backed by gold bullion stored at the Perth Mint, with a government guarantee from Western Australia.

-One of the lowest-cost options with a management fee of 0.15%.

-Assets under management: $1.35bn.

-Can be converted into physical bullion through a Perth Mint Depository account.

BetaShares Gold Bullion ETF Currency Hedged (ASX: QAU)

-Backed by physical gold stored in London but hedged to minimise currency risk between AUD and USD.

-Management fee: 0.59%.

-Assets under management: $944m.

VanEck Gold Bullion ETF (ASX: NUGG)

-Backed by physical gold sourced exclusively from Australian producers and stored at the Perth Mint

-Unhedged, with a management fee of 0.25%.

Global X Gold Bullion (Currency Hedged) ETF (ASX: GHLD)

-Tracks the spot price of gold while hedging against AUD/USD currency movements.

-Management fee: 0.35%.

Gold Mining ETFs

These ETFs invest in companies involved in gold mining and production, offering indirect exposure to the gold market.

VanEck Gold Miners ETF (ASX: GDX)

-Provides exposure to global gold miners, including companies like Newmont and Barrick Gold, with some Australian holdings (~11%).

-Management fee: 0.53%.

BetaShares Global Gold Miners ETF (ASX: MNRS)

-Tracks an index of global gold mining companies, with a focus on firms outside Australia (~50% Canadian).

-Currency-hedged and provides semi-annual distributions.

-Management fee: 0.57%.

ASX-listed Companies

But what if you’d like to pick a specific gold miner or two? The rewards from successful stock-picking can be many times over more rewarding than through owning a risk-limiting ETF.

Stockbrokers have updated their thoughts and favourites recently. Below is a bird eye’s view of those sector updates.

Analysts at Canaccord Genuity also remind investors there’s an M&A wave heating up, and it includes the local gold miners with Gold Road ((GOR)), Spartan Resources ((SPR)) and De Grey Mining ((DEG)) all receiving a knock on the door from suitors these past number of weeks.

Canaccord thinks more deals will be announced since strong cash flows are strengthening balance sheets across the sector globally.

Similar to just about everyone else, Canaccord has upgraded its gold price forecast to US$3447/oz (for now). In addition, its rating for Catalyst Metals ((CYL)) was downgraded to Hold from Buy in response to a fierce share price rally, while Capricorn Metals ((CMM)) was upgraded to Buy from Hold.

Canaccord’s latest sector update identifies the following “preferred exposures”:

-Northern Star ((NST))
-Genesis Minerals ((GMD))
-Perseus Mining ((PRU))
-Ramelius Resources ((RMS))
-West African Resources ((WAF))
-Westgold Resources ((WGX))
-Andean Silver ((ASL))
-Predictive Discovery ((PDI))
-Strickland Metals ((STK))

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Bell Potter has Buy ratings for most gold companies under coverage, including:

-Northern Star
-Evolution Mining ((EVN))
-Regis Resources ((RRL))
-Gold Road Resources ((GOR))
-Alkane Resources ((ALK))

Currently carrying a Buy, Speculative rating:

-Catalyst Metals
-Chalice Mining ((CHN))
-Southern Cross Gold ((SX2))
-Santana Minerals ((SMI))

Which leaves the following with a Hold rating:

-Bellevue Gold ((BGL)), recently downgraded
-Genesis Minerals
-Capricorn Metals

And the following with a Hold, Speculative rating:

-De Grey Mining
-S2 Resources ((S2R))

The one Sell rating is reserved for Pantoro ((PNR)).

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Analysts at Goldman Sachs recently upgraded Capricorn Metals to Buy, while still liking Newmont Corp ((NEM)) and Northern Star among the larger caps, and Gold Road (upgraded to Buy) and Bellevue Gold in the smaller segment.

Goldman Sachs does not like Regis Resources and rates this stock a Sell.

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Analysts at Citi prefer Evolution Mining over Northern Star, while rating Newmont Corp a Buy and nominating Genesis Metals as most preferred outside the ASX100.

On Citi’s estimates, share prices in general are pricing in gold priced around US$2250-2500/oz while the physical price has marched beyond US$3000.

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Barrenjoey’s most preferred sector exposures are Newmont Corp, Capricorn Metals and West African Resources.

Least preferred are Regis Resources, Gold Road and Emerald Resources ((EMR)).

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Analysts at Petra Capital highlight shares in ASX-listed producers have pretty much doubled over the twelve months past. Petra continues to recommend investors have an Overweight allocation to the sector.

Westgold Resources, Pantoro & St Barbara ((SBM)) are this broker’s preferred producers, Meeka Metals ((MEK)) and Black Cat Syndicate ((BC8)) are favourite picks among developers, while WIA Gold ((WIA)), Aurum Resources ((AUE)) and Saturn Metals ((STN)) are seen as the best emerging stocks.

Petra Capital also has a Buy rating on Vault Minerals ((VAU)).

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UBS’s Buy ratings are reserved for:

-Northern Star
-Perseus Mining
-De Grey Mining
-Gold Road
-Bellevue Gold
-Genesis Minerals

Evolution Mining was recently upgraded to Neutral leaving Regis Resources with carrying the one lonely Sell rating.

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Analysts at RBC Capital are equally positive, but their coverage has concentrated mostly on gold companies in North-America. The latest update includes a positive view on Newmont Corp.

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Jarden has kept its preference for Northern Star over Evolution Mining. But the former is only rated Neutral versus Underweight for the latter.

Jarden sees strong earnings support for Vault, which is seen as ‘cheap’ and thus rated Buy. An Overweight rating goes to Capricorn Metals (Overweight is one step below Buy at Jarden).

Bellevue Gold is also Underweight rated.

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FNArena’s admin is showing Moelis has Buy ratings for:

-Alkane Resources
-Vault Minerals

Hold ratings are reserved for:

-Bellevue Gold
-Genesis Minerals
-Gold Road
-Pantoro

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Macquarie has currently Buy-equivalent ratings for:

-Belevue Gold
-Newmont Corp
-Perseus Mining
-Ramelius Resources
-Resolute Mining ((RSG))
-Vault Minerals
-West African Resources
-Westgold Resources

The following are rated Neutral:

-Capricorn Metals
-Genesis Minerals

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