Gold is on track for its biggest weekly increase since October 2023, buoyed by a sharp rise in safe-haven demand following an escalation in the Russia-Ukraine conflict.
As of Friday, midday in Toronto, spot gold had risen more than five per cent this week to top $2,700 an ounce, with year-to-date gains nearing 30 per cent. The latest surge comes after Ukraine reported Russia’s use of a new type of ballistic missile in an attack on Dnipro, a development seen as a direct signal to Kyiv’s Western allies. Heightened geopolitical risks, particularly involving major powers or regions, often drive investors towards gold and other safety assets.
The broader geopolitical backdrop has provided fertile ground for gold’s rally this year. Alongside the Russia-Ukraine war, conflicts in the Middle East and rising global economic uncertainty have sustained interest in the metal as a store of value.
Outlook remains bullish
Gold’s upward trajectory faced temporary headwinds following the re-election of Donald Trump. The resulting surge in the U.S. dollar to record highs briefly pressured commodity prices, including gold. Despite this, the precious metal has demonstrated resilience, with analysts forecasting fresh records in 2025.
Goldman Sachs and UBS both issued bullish outlooks for gold in recent days, underscoring expectations of continued gains next year. Goldman recently reiterated its $3,000-per-ounce target for 2025, citing ongoing central bank purchases and a favourable interest rate environment as key drivers.
IDX Advisors’ Ben McMillan went one step further in an interview with BNN Bloomberg, saying that the price of the yellow metal could break $5,000-per-ounce within the decade.
“The central bank buying is something that started years and years ago, and that is going to play out over the coming decade … [China] has been selling down their treasuries and buying gold. These are not small tailwinds, all of which conspire, we think, to push the price of gold much higher in the coming three, four, or five years,” he said.
Miners could be poised to benefit
As those tailwinds push up the price of bullion, gold mining companies could benefit along the way. Gold miners have positioned themselves as attractive investments by offering superior returns compared to holding physical gold. This value proposition is supported by dividend payouts and share repurchase programmes. However, the sector has faced persistent challenges, including a history of over-leveraged expansions, which saddled producers with debt and alienated shareholders.
McMillan reckons that though the largest players in the gold space – such as Newmont Corporation and Barrick Gold Corp. – have outperformed smaller miners over the past few years, that could now be changing. Indeed, Newmont’s share price has underperformed this year, reflecting broader concerns about the struggle to deliver consistent value.
“This is an environment over the last couple of years which has just really favoured big, quality companies with big, strong balance sheets. And when you look at the juniors, they have been penalized because a lot of them have much weaker balance sheets; a lot of them are more exploratory in nature,” McMillan said.
“Investors are rewarding proven reserves, as opposed to some more exploration-based reserves. But we do think that has gotten to such a discount that we do think now there is a little bit more opportunity on a relative basis in the juniors relative to some of the bigger-cap names.”
Orla Mining makes a splash
One such company might be Orla Mining Limited, which this week announced the acquisition of Newmont’s Musselwhite gold mine in Ontario for up to $850 million, signaling a strategic move to bolster Orla’s production portfolio in a region rich with mining opportunities. Musselwhite, an established operation, adds a high-quality asset to the company’s portfolio, aligning with its growth strategy.
The company’s chief executive officer, Jason Simpson, called the deal “absolutely transformative” in an interview with BNN Bloomberg.
“We were glad to find the exactly perfect asset to fill in our portfolio … We have got very healthy cash production out of Mexico,” Simpson said.
“Now stepping into Canada, adding a second producing asset; all the while being self-funded for our growth next in in the United States, at which point we will be producing 500,000 ounces out of three countries at an industry leading all-in sustaining cost.”
If that $5,000 gold prediction does come to pass, Orla will not see a complete benefit from that price – it signed a gold prepay agreement for 150,000 ounces over three years, representing about 16 per cent of consolidated production at Musselwhite.
With spot prices where they are, however, that is still quite favourable for Orla.
As Simpson put it, “We’re locking in these all-time-high gold prices, and we are still leaving the majority of the gold exposure to our investors, simply using the ounces from the asset that we want to acquire to pay to acquire it, a very sensible move on our part … This is simply selling our revenue in the future now so that we can pay for this asset without diluting our existing shareholders.”