(Kitco News) - Investment demand continues to support gold prices at elevated levels above $3,300 an ounce. While some believe that the precious metal is overextended, one portfolio manager said there is still plenty of value in the marketplace—if you know where to look.
In a recent interview with Kitco News, Chris Mancini, associate portfolio manager of the Gabelli Gold Fund (GOLDX), said that with gold prices holding above $3,000 an ounce, it's only a matter of time before investors start to recognize the value and growth potential in the mining sector.
“Sitting here in my seat and looking at my models and seeing the free cash that the gold stocks are going to generate, especially if you think the price of gold is going to stay above $3,000, gold stocks really are the place to be,” he said.
“We believe that owning the miners right now is the best approach because they're extremely undervalued,” Mancini said in an updated note Monday. “Currently, these companies are generating significant free cash flow, paying dividends, and—more importantly—buying back large amounts of stock because their shares are so cheap. That’s why we think this is the right strategy."
In a report published in March, Mancini used Agnico Eagle, Canada’s largest gold producer, as an example of the impact gold prices are having on the mining sector. He pointed out that with gold prices above $3,000 an ounce, he would expect the senior gold producer to generate around 8% free cash flow yield.
“They're generating with some growth, so free cash flow yields should grow over the next couple of years. These companies, compared to banks and tech companies, are generating substantial free cash flow,” he said.
The comments come as major gold producers have reported record earnings for the first quarter. Mancini noted that money has started to flow into the gold sector, but added that there is still significant growth potential.
So far in 2025, gold prices are up nearly 26%, even as prices have pulled back from last month’s record highs of $3,500 an ounce. The VanEck Gold Miners ETF (NYSE: GDX), however, is up nearly 41%.
Despite the gains this year, GDX remains down more than 24% from its 2011 all-time highs.
“Investors and fund managers haven’t been paying much attention to miners because they are focused on the gold price,” Mancini said. “Because of what’s happening in the economy and general equity markets, everyone is looking at gold. I expect they will start to pay more attention to the mining sector.”
Although gold prices have retreated from record highs, Mancini said that, given gold’s rally over the past year, it is difficult to see prices falling below $3,000 an ounce, as the market appears to be building a new base.
“The world will continue to have some uncertainty, and that will continue to drive flows into gold,” he said.
Along with global economic uncertainty, Mancini said he expects gold will also benefit from further weakness in the U.S. dollar and falling interest rates, as markets continue to anticipate rate cuts from the Federal Reserve this summer through year-end.
“Gold is benefiting from a reinterpretation of the value of fiat currencies like the U.S. dollar,” he said. “The Federal Reserve created new money in 2008 and 2020 to prop up markets when they were faltering. Now, President Trump is encouraging the Fed to act to prop up the stock and bond markets using monetary manipulation. The trade going forward is really about China and the rest of the world diversifying out of dollars and into gold, and China’s central bank is now buying gold.”
