Gold Digger: Gold miners could still outperform after massive FY2025

• Gold miners outperform key market indices in first half of 2025
• But some fund managers continue to see gold miners as undervalued
• Big price moves for Falcon Metals and Yandal Resources this week

This chart from Sprott’s latest gold and silver update gives a strong sense of the outperformance of gold equities this year as tariff uncertainty and a US dollar flop has sent investors flocking to safe haven assets.

Stock indices continue to perform strongly, but not as well as precious metals, with gold and silver bullion up around 25% to the end of June.

Some good reasons behind that, Sprott’s Paul Wong says.

“While markets continue to recover from the early April selloff, the longer-term policy and structural risks remain in place and mostly unresolved,” he said in the note.

“These include the unsustainable and worsening trajectory of the US fiscal debt and deficit situation, a weakening US dollar policy, institutional erosion, rule of law and corruption, ongoing trade and tariff tensions, unilateral and capricious policy actions, and the list grows.

“Taken in its entirety, we believe gold is being bought as a safe haven asset due to the US dollar’s eroding store of value role and the fracturing of trust across nearly all global monetary and political orders and systems.”

And those haven’t come close to gold stocks, which have surged 53%, according to the NYSE Arca Gold Miners Index

Margin expansion, which typically runs proportionally ahead of the change in the actual gold price when prices are on the up, has been a big factor.

That, on the face of things, could make gold stocks look a little overvalued at the moment, given equities have surged by a factor of 2x the gold price in 2025 so far.

Not so, this fundie says

It’s always worth noting fundies tend to speak their own book.

But after a 54.2% YTD gain, Cameron Judd, the portfolio manager out of Victor Smorgon Partners’ gold fund, is understandably bullish.

In an update on Thursday he noted the average Aussie dollar gold price in the quarter was $5129/oz, a 12% increase on the March quarter that came in as the largest absolute increase in 46 years.

“Given the sustained and steady increase in gold prices, gold miners continue to report higher revenues and investors are watching closely for higher margins to result in accelerating cashflows,” Judd said.

“We believe gold producers that can contain costs and demonstrate an ability to convert higher prices into cash on the balance sheet will be further rewarded through the second half of 2025.”

Data out of the World Gold Council in its annual survey of central banks showed a record number central banks, powered by emerging markets institutions, expect central banks to accumulate gold in 2025.

At ~1000t over the past three years, the buying trend had doubled from the average seen over the previous decade, Judd noted.

He sees gold heading as high as US$4000/oz.

“The gold price has risen for six straight months since the start of 2025. Gold’s performance during times of crisis, portfolio diversification and inflation hedging are key themes driving central bank and other investors to accumulate more gold, which is maintaining upward pressure on the price,” he said.

“Victor Smorgon Partners holds the view that a 5% to 10% allocation of gold in a diversified portfolio of assets will provide superior risk-adjusted returns with lower volatility over time.”

VSP’s gold strategy has an estimated net return of 115.4% since its inception in May 2020, with the ASX gold equities index up 63.5% in the same time. Performance was less stellar in the back end of FY25, down 4.2% in the month of June and up 1.9% for the June quarter.

Can the good times continue for gold stock pickers? The question may be less about the value of gold equities against gold and more about the value of gold equities compared to the rest of the market, Judd thinks.

“Despite the strong gold price performance and fundamentals supporting further appreciation, gold miners are trading at discounted valuations on the ASX. (Emphasis not ours.)

“Gold miners represent the most compelling opportunity in the gold sector. Gold miners are generating significant free cash flow, with implied margins at record highs exceeding A$1,500 /oz of production.

“The ASX gold sector is trading on a 12-month forward EV/EBITDA of 4.5 times, significantly lower than the ASX All Ordinaries which is trading on 10.5 times.”

VSP’s gold fund has 26% of its holding in +1Mozpa producers with 39% in mid-tiers producing less than 1Mozpa.

On top of that, 8% of the allocation is in developers with 22% in explorers and 5% in cash. The vast bulk of its listed company investments are in Australia at 69%.

Winners and losers

Here’s how ASX-listed precious metals stocks are performing:

Falcon Metals (ASX:FAL)

The market absolutely adores a Victorian gold story, bonanza grades and visible gold.

That’s the trifecta hit in the first wedge hole at Blue Moon, a prospect that has been interpreted as the down plunge extension of the Garden Gully Anticline, a trend that has historically produced 5.2Moz at 15g/t Au over 8km of strike.

The ground surrounds the Bendigo mining permit, which remains in moratorium but has historically produced some 22Moz.

That hit came in at 1.2m at 543g’t from 544.2m, including 0.6m at 557g/t from 544.2m and 0.6m at 529g/t from 544.8m.

The high grade strike was 5m up-dip from target T552, which was a bedding parallel quartz vein identified in the parent hole, Falcon said.

The wedge hole remains in progress, planning to hit a depth of 670m and Falcon is now planning additional wedge holes to target zones closer to the fold hinge, the area where wider mineralisation is typically found around Bendigo.

Let’s get real though, this is what you want to see.

“This outstanding result from the first wedge hole at Blue Moon is highly encouraging and it is exciting to see the abundance of visible gold present,” Falcon MD Tim Markwell said.

“The early success from the first phase of drilling shows the untapped potential of the Bendigo Goldfield as it continues northwards through Falcon’s ground and we look forward to seeing the results as we get closer to the fold hinge where Bendigo-style saddle reefs could occur.”

Falcon Metals has decent backing behind it. The explorer is a spinout of Tim Goyder’s Gonneville nickel-copper-PGE discoverer Chalice Mining (ASX:CHN), which counts former Sirius Resources head honcho and S2 Resources (ASX:S2R) boss Mark Bennett as its chair.

Yandal Resources (ASX:YRL)

The explorer that does what it says on the tin, Yandal has a bunch of ground in the Yandal gold belt of WA, near major mining operations like Northern Star’s Jundee and Bronzewing.

Having caught the eye last year with results from its Siona discovery, aircore drilling at the Arrakis prospect on the Caladan Fold has investors dreaming of another discovery.

YRL hit 11m at 2.1g/t from 90m in hole 25IWBAC023, 12m at 1.1g/t from 45m in 25IWBAC032 and 12m at 0.5g/t from 70m to end of hole in 25IWBAC032.

Those shallow strikes show mineralisation over 800m of strike, which remains open to the southeast and northwest.

The 125-hole, 12,500m program is expected to be completed in the next fortnight.

“To intercept mineralisation of this tenure within a first pass aircore drilling across three consecutive 400m spaced lines is a significant early-stage success, which should not be understated. We are also observing very similar geology associated with mineralisation across all three lines, suggesting we may be dealing with a single continuous mineralised structure,” YRL MD Chris Oorschot said.

“The current aircore program is testing the full length of the Arrakis Prospect; there is ample opportunity for further positive results ahead of us as the company continues its pursuit of a large-scale gold discovery within the Yandal Greenstone Belt.”

The views, information, or opinions expressed in the commentary in this article are solely those of the fund managers and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.