'The sky's the limit': gold price reaches record high, but not all northern Ontario miners are cashing in
The surge in gold prices is being fueled by geopolitical tensions, economic uncertainty
Northern Ontario gold miners from Dubreuilville to Matachewan are celebrating as the price of gold continues to reach record heights, now trading above $3,000 USD an ounce for the first time in history.
"I'm super excited. It seems unbelievable that we've reached that top. A lot of commentators predicted $3,000, but it seemed unreal, honestly. It still feels a bit unreal because the move has been really, really fast," said Kai Hoffman, CEO of Soar Financial Group.
"I'm also a bit worried. I'm excited and worried at the same time because the move has been so violent, for lack of a better term."
Hoffman, a financial analyst based in Frankfurt, Germany who has been closely tracking the gold market and its implications for the Canadian mining sector, said prices rarely go straight up without a dramatic crash.
"It's just really the hype and a lot of gut feel as well, gold coming back into the mainstream discussions, Joe Rogan, Elon Musk, Donald Trump, mentioning gold… it was just bringing a lot of interest and a lot of eyeballs back to gold, which is great in general. But I'm little worried that it's too much too fast," said Hoffman, adding that he believes a $300 or $200 correction would be healthy to "shake some loose hands out of the market."
He said for gold mining companies in Timmins, Kirkland Lake and elsewhere in northern Ontario, cash flow is "exploding" and costs have been "somewhat under control," with no significant "cost pressures" on gold miners since the price of oil has been dropping.
Hoffman pointed to reports from Agnico Eagle, which has two gold mines in the northeast, listing per ounce production costs at $1,200 USD, meaning the company is getting $1,800 USD profit per ounce of gold.
However, he said northern Ontario's junior gold exploration sector is still struggling to attract investors needed to turn deposits into actual mines.
"The risk appetite for the juniors hasn't really come back," Hoffman said. "So the grassroots explorers are still struggling a little bit."
Why the increase?
The sharp rise in gold prices is driven by several factors, including geopolitical tensions such as Russia's war on Ukraine, instability in the Middle East and economic uncertainty stemming from global trade disputes, explained Hoffman.
Additionally, central bank purchases from Eastern countries like Poland and the US repatriating gold to the COMEX have further heightened market uncertainty, pushing gold prices even higher.
When it comes to investing in gold, Hoffman explained that there's a difference between physical gold and gold mining stocks. Physical gold is a "safe haven" investment, while mining stocks offer higher risk.
As for the future, Hoffman believes the momentum behind gold is building.
"The sky's the limit. There's so much uncertainty that is driving prices right now, I don't think world peace is on the agenda just yet, so there's more room," he said.
"Is it $4,000? It won't be tomorrow, but the trend is your friend in that regard and momentum is building behind gold, so I wouldn't rule it out."
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