True Fair Value Of Gold Miners Is 100% Higher
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(Kitco News) - Gold equity stocks are currently trading at a massive discount to their fair value in the market, said Garret Goggin, associate editor of the Gold Stock Analyst.
“The miners are much healthier than they have been. They’ve got stronger cash margins; they’re trading at a larger discount than they ever have been, all the way back to 1995,” Goggin told Kitco News on the sidelines of the Gold Stock Analyst Investor Day conference in Florida. “The fair value is 100% higher.”
Goggin attributes investor apathy in the gold space to the low valuations.
“It’s still investor apathy. [There’s a] very small retail following, the average retail guy is chasing crypto and chasing weed stocks, the institutional investors are absolutely not involved yet,” he said.
He added that gold miners are in much better financial health now and are focused on profitability, resulting in reduced cash costs, which have boosted their margins up to an average of 55%.
Goggin’s research has shown that using data going back to 1995, there has been a 90% correlation between the HUI Gold Index and miners’ margins, but in the last two years, the relationship has diverged with margins improving but the HUI index climbing very little.
According to Goggin, this breakdown in correlation signals an undervaluation in stock prices and an eventual price recovery.
On silver stocks, Goggin said that like gold miners, they are currently very attractively priced.
“They do have news coming up and they’re fundamentally undervalued versus my analysis of them and they have economic drivers that should be influencing their price regardless of where the price of gold and silver moves in the future,” he said.