Gold was top of mind for investors at this year’s Vancouver Resource Investment Conference (VRIC).
The precious metal’s price reached a record high in 2023 on the back of economic uncertainty and rising tensions in the Middle East. But while it’s still above US$2,000 per ounce, many gold stocks haven’t seen share price gains.
Speaking during a fireside chat at VRIC, resource industry veteran Ross Beaty, who is currently focused on Equinox Gold (TSX:EQX,NYSEAMERICAN:EQX), shared his thoughts on the gold market, including the disconnect between the price of gold and gold equities, and where he’s looking for investment opportunities right now.
What will drive the gold price in 2024?
Beaty began by going over gold’s performance in 2023, saying that it had a strong showing despite facing headwinds such as high interest rates and a strong US dollar, both of which are typically negative for the metal.
Heading further into 2024, he is bullish on gold and thinks the market will benefit from supportive fundamentals.
“From today on, what’s bullish for gold? It’s going to be easing, it’s going to be lower interest rates,” he explained. “It’s going to be all the things that typically strengthen gold. A weaker US dollar, which is likely to happen this year. Continuing gold purchases by central banks. So certainly I expect gold to trade at new highs this year.”
Why are gold stocks lagging behind the gold price?
Many gold investors have had a frustrating few years waiting for gold equities to catch up with the gold price.
“Typically gold trades in tandem with equities,” said Beaty, who has also found himself dismayed by the lack of movement in gold stocks, from junior exploration companies to senior producers. “In late 2022 and all throughout 2023 we have had this increasingly illogical, bizarre disconnect between higher gold prices and lower gold equities.”
What’s behind this persistent disconnect between the yellow metal itself and the stocks?
“The so-called smart money sold gold equities because they thought oil prices were going to crater, and that’s one of the reasons gold equities went down last year. They’re still in the tank right now, while at the same time gold has gone up,” said Beaty. “Why were they wrong on gold? It’s because they forgot gold really is a store of value, and it’s an alternative currency for those who want to get out of the dollar — like China, Russia and all sorts of other countries buying gold from central banks. Last year and the year before we saw record purchases of gold by central banks.”
In his decades-long career, the resource industry entrepreneur said he’s never seen anything like the current situation. And that’s precisely why Beaty thinks the market is due for a correction.
“I’m going to suggest we’re going to go back to the ordinary pattern. Gold equities will bounce back,” he told VRIC attendees. “There’s going to be a very happy and significant move in gold equities in 2024. I don’t know when or how much, but it will happen.” With that in mind, Beaty said he’s starting to buy gold equities for the first time in five years. He suggested to investors, “Resist the tendency to sell and take a small profit, because when this recalibration happens you’ll get a double, a triple. And that’s when you make the real money.”
What Beaty looks for in a gold stock
Speaking about how he evaluates gold stocks, Beaty said his “sweet spot” is companies with a defined large-scale resource without any fatal flaws, a successful management team and access to capital.
He doesn’t get too hung up on jurisdiction because risk can fluctuate quickly. Beaty also said his portfolio incorporates exploration stocks, a few intermediate plays and a few intermediate producers actively moving from one tier to another.
His own company, Equinox Gold, produced 564,500 ounces of the yellow metal in 2023 and is on track to put out more than 600,000 ounces of gold in 2024. Beaty is a strong believer in scale, and his goal is to transition the company from an intermediate producer to a senior producer with annual production of over 1 million ounces of gold.
Equinox currently has seven operating gold mines throughout the Americas and is slated to commission a new gold mine in Ontario, Canada, in the first half of this year.
Investor takeaway
In Beaty’s opinion, the stage is set for a robust gold performance in 2024. Although gold equities haven’t responded in kind over the past year, he believes that dynamic is set to change. In the meantime, investors can ready their portfolios.
Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.