More National Bank National Bank Financial analysts warn investors should expect volatile returns from precious metals equities in 2025 given the “uncertain path” of both interest rate cuts and inflation.
“The USD gold and silver spot price finished up about 27 per cent and 22 per cent in 2024, respectively, the best annual performance in more than a decade,” the firm said. “We begin the 2025 calendar year optimistic on the outlook for gold and silver prices and correspondingly equities given historical price appreciation in periods of declining or flattening real rates. That said, we continue to anticipate near-term volatility around key U.S. economic data prints as they pertain to expectations around the magnitude, timing and quantity of future U.S. Fed rate cuts. Geopolitical tensions continue to be topical for gold demand, and we could see further safe haven support from escalating tensions across the globe. The uncertain policy direction of the incoming Trump administration will likely lead to shifts in inflation forecasts and Fed Funds Rate expectations, further amplifying near-term price volatility as some policies could have dramatic impacts on the outlook for U.S. inflation. Thus, in these uncertain times, we believe that the best precious metals companies to invest in are those with well-funded near-term production growth, as well as those with a strong balance sheet and/or a catalyst rich NTM [next 12 months].”
In a research report released Thursday titled Don’t Stop Believin’ (in Gold), analysts Mike Parkin, Shane Nagle, Don DeMarco and Rabi Nizami argued market conditions continue to be supportive of consolidation, while they also emphasize operational excellence is rewarded.
“In our view, near-term price volatility and favourable long-term fundamentals create a market environment where gold producers will continue to shop for opportunities to add long-term precious metal growth to their portfolios at attractive valuations,” they said. “We outline near-term FCF generation and production growth across our universe and when weighed against balance sheet strength/valuations, identify: ABX, AEM, DPM, FNV, LUG, K, PAAS, OGC, ORA and WDO as likely consolidators and ABRA, AMX, ARTG, ELD, EQX, IAU, IMG, KNT, MAG, NGD, ODV, OR, PPTA, SGD and VZLA as potential acquisition targets.”
“In 2024, the market rewarded companies within our coverage that were able to deliver on their original guidance, with the market punishing those who failed to deliver or are showing at risk of missing guidance. We believe this trend will continue into 2025 as the market will continue to reward companies with the ability to meet or exceed guidance from a production and cost perspective.”
While making a series of target price adjustments to stocks in their coverage universe after updating their price deck for both metals and foreign exchange, the analysts also named their “top picks” for the year ahead. They are:
Seniors
* Pan American Silver Corp. with an “outperform” rating and $45 target, rising from $44.25.. Average: $41.64.
Mr. DeMarco: “Improving operational performance marked by FCF of $151-million in Q3/24, expected to continue, with flagship La Colorada ventilation fixed lifting throughput and grade, and Jacobina optimization study on deck.”