We’re back on the trail of the great “gold miners are undervalued” thought bubble of 2022, and this time we’ve found a chart that may prove it.

Check out this post to Twitter by Fat Tail Investment Research editorial director Greg Canavan, showing the absolute snap in the relationship between gold prices and ASX stock valuations in recent months.

More fuel to the fire.

Does this mean gold comes down, miners go up or are we cursed to continue scaling the terraces of this purgatory?

On one side gold is being weighed down by the threat of rising interest rates, which suggests it could come down from its price yesterday of US$1822/oz ($2553/oz Aussie).

On the other, demand for physical gold remains strong according to the World Gold Council, inflation is basically out of control and at over $2500/oz, Australian gold miners are averaging a near $1000/oz margin on all in sustaining costs.

According to Aurum Analytics, Australian gold mines in September operated at an average AISC of A$1,571/oz.

Described by legendary mining investor Rick Rule last year as “universally too cheap”, some analysts believe top Australian gold equities are running at major discounts based on fundamental metrics.

While the gold price is up slightly on the start of the year and is still hovering around the US$1800/oz mark, the ASX All Ordinaries gold sub-index is down 8.24% year to date.

Northern Star Resources (ASX:NST) is a case in point. Teething issues at its Pogo mine in Alaska aside, Australia’s second largest gold miner is trading at levels not seen since gold was fetching less than US$1300/oz ($1800/oz) in early 2019.

Despite rising costs, the growth of Aussie gold stocks haven’t come at the expense of profits either. In the two years between 2019 and 2021, Northern Star’s underlying NPAT rose from $172 million to $372m.

Over that same period Evolution Mining’s (ASX:EVN) underlying NPAT increased from $218m to $352m, and Newcrest’s (ASX:NCM) more than doubled to a record US$1.2 billion.


Gold Big 3 share prices today: