Gold: a growth opportunity in this dynamic and inflationary environment

Earlier this year, we anticipated that mounting geopolitical tensions, central bank gold accumulation, and market volatility would drive gold prices higher, with positive implications for gold mining stocks. With gold recently reaching a new high of $2,758 per ounce, our expectations have largely been validated, confirming the robust trend in the gold market and creating a favorable environment for mining stocks, which have started closing their long-standing valuation gap with gold itself.

The recent surge in gold prices strengthens the case for undervalued mining stocks, which continue to show profitability improvements as they catch up to gold’s higher prices. This trend points to sustained growth potential, especially as investor interest in mining equities grows alongside expectations of increasing M&A activity in the sector. Despite recent rallies, mining stocks on average remain 60% below their historical peaks, suggesting ample upside potential as the sector gains more traction with institutional investors.

Some high-beta mining stocks are showing promising growth due to their price sensitivity to gold’s movements, offering opportunities for enhanced returns. Companies like Newmont Corporation and Barrick Gold have shown resilience, and mid-tier mining stocks with historical beta could be excellent candidates to capture additional upside. Furthermore, silver mining stocks such as Pan American Silver, Fresnillo, and First Majestic Silver—recently added to our portfolio—offer compelling growth potential as silver prices often follow gold with greater volatility.

While the outlook remains positive, operational and regulatory challenges in the mining sector are worth noting. Rising exploration and operating costs, along with heightened regulatory constraints, have limited immediate valuation gains and are expected to continue presenting headwinds. Additionally, resource nationalization risks in regions such as in South Amarica and Africa, introduce geopolitical risks that require active management. While these risks should be closely monitored, they also reinforce the investment case for gold and silver as safe-haven assets.

At APIS AM, we recognize this environment as an opportunity to leverage our expertise in gold and silver mining equities. With continued geopolitical tensions, central bank buying activity, and favorable fundamentals for gold mining stocks, we see significant upside for well-positioned mining equities.

 While the initial market reaction to Trump’s re-election was extremely positive with a huge decrease of the volatility, and a positive trend on the market, we anticipate that inflationary pressures from his policies will support the longer-term case for gold. The Federal Reserve, as expected, lowered its interest rates by 25 basis points on Thursday, November 7, as part of its ongoing strategy to support the economy amid global uncertainties and to extend the current U.S. economic expansion.

However, in light of Trump’s economic policies, this rate-cutting trend could be reconsidered. While Trump has consistently advocated for low interest rates to boost economic growth, some of his policies—such as increased infrastructure spending and protectionist trade measures—could create inflationary pressures over time.

Thus, while the Fed is currently following an accommodative stance, Trump’s policies could shift this dynamic, prompting a more restrictive monetary policy in response to rising inflationary pressures. Trump administration's economic agenda, with a focus on spending, deregulation, and protectionist policies, is likely to drive inflation, weakening potentially the dollar and further boosting demand for gold as a hedge.

In conclusion, the Trump effect—while likely to induce short-term fluctuations—will ultimately amplify the appeal of precious metals as safe-haven assets, potentially benefiting gold and silver mining stocks. With the sustained upward trend in gold prices and narrowing valuation gaps in mining equities, we see compelling growth opportunities for investors who can navigate this dynamic and inflationary environment.