Gold Is Primed To Rally To New Record Highs And The Gold Stocks Have Spectacular Value Propositions

It is very encouraging to see the recent breakout in gold and it is primed to set a series of new record highs. What is exciting is that for investors that want exposure to gold through gold stocks, there are still many with tremendous value propositions.

To emphasize how underappreciated the gold miners are after Agnico Eagle reported their recent quarterly report, I did a show talking about how it compared to Tesla’s quarterly report. This was to show how underloved the gold stocks are from the top and all the way down the food chain.

In the second quarter, Tesla had around $200 million of free cash flow and trades at nearly a trillion dollar valuation. While Agnico Eagle had a record $1.3 billion in free cash flow for the same quarter and has a $68 billion valuation. If you judge companies by their free cash flow and valuation relative to that, Agnico Eagle is a much better investment opportunity than Tesla. I know many will throw rotten tomatoes at me for that comparison but the numbers are the numbers.

Many of the gold miners are making records in free cash flow and that will continue as gold goes much higher as I see it doing. Meanwhile, the MAG 7 stocks are trading at on average 50 times their free cash flow. Gold mining is a very good business these days when it comes to free cash flow.

I make the case that not only is gold a fantastic investment that will trade much higher, the gold stocks are an even better opportunity.

As you go down the food chain into the mid-tiers, junior miners, developers with high-quality projects are even more of a value proposition.

The most torque is in the explorers with important discoveries that are even more underloved. I am seeing valuations in many of them that are trading at substantial discounts to the reality of what they already have in the ground. They are tremendous opportunities for investors that want to get in before the generalist investors figure it out.

With the metrics that I mention for the gold miners comparing to other sectors, it won’t be long before high net worth generalist investors, generalist institutional investors and generalist retail investors start running the numbers.

While I believe strongly that the fundamentals are exceptional for the price of gold, and silver as well, the value proposition in the stocks are even better.

All the best,

Allan Barry Laboucan