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Donald Trump has created a new gold rush. The market volatility triggered by the unpredictable actions of his new administration has prompted investors to pour money into safe havens, of which gold is the most popular choice. After less than a month in office, Mr. Trump's blistering campaign of tearing up all the old rules has left people dazed and confused – and looking for ways to protect their assets. Gold has been a big beneficiary of this trend.
The precious metal has traditionally been seen as a hedge against inflation and currency depreciation, as well as a non-correlated asset class that does not move with the more widely held categories of stocks and bonds and has little correlation with industrial and agricultural commodities.
Having some gold in your portfolio is essentially owning insurance against political and monetary uncertainty in an asset that has maintained its purchasing power in real terms over several thousand years. Gold is not a liability of any government. That means it cannot be rescinded or frozen, in contrast to Russia’s U.S. dollar holdings after the invasion of Ukraine in 2022.
Foreign central banks have taken notice of these developments, and central bank buying has been probably the principal reason for the rise in gold's price over the last couple of years, added to the traditional Chinese and Indian retail buying.
I suggest retail buyers should become believers in having some gold in their portfolio, perhaps by taking some profits on the Magnificent Seven large cap technology stocks.
When I last reviewed the progress of gold and precious metals stocks in the middle of 2024, I noted that a target of $3,000 per oz. was only 20% above its price then. Major Wall Street investment banks such as Goldman Sachs had a $2,800 target. Currently, gold April futures are near an all-time high $2,933 per oz.
Gold mining stocks usually go up 3-4 times the underlying move in the metal price, as every increase in the gold price drops straight to their bottom line. They have notably lagged gold so far in this bull market but have finally started to accelerate. The iShares S&P/TSX Global Gold Miners ETF (TSX: XGD) is up a remarkable 24% so far this year against 13% for gold
Investors looking at the precious metals sector should concentrate on well managed, mid-sized companies located in politically stable countries. This largely means those with assets in Canada, the U.S., Australia, and Mexico, although those with exposure to Chile, Brazil, and Europe are worth considering. One such miner is Alamos Gold.
Alamos Gold (TSX: AGI) is probably the premier intermediate gold producer in Canada with production up 7% to 567,000 oz. in 2024. About 90% of its production comes from its three mines in Canada, Young Davidson, Island Gold, and the recently acquired Magino mine, adjacent to Island Gold. Its original property, Mulatos, is located in Mexico, where it has been operating for 20 years.
The takeover of financially distressed Argonaut Gold in mid-2024, brought in its Magino mine. Production from the combined Island Gold/Magino complex is forecast to rise from 280,000 oz. in 2024 to over 400,000 oz. when Phase 3 is completed in 2026.
The stock is up 26% since I wrote about it in September 2024. Alamos shares have just about doubled over the last year and are up 23% year to date.
For the third quarter (to Sept. 30), Alamos produced a record 152,000 oz. of gold at an all-in sustaining cost (AISC) of $1,425 per oz. The company reported record revenue of $360.9 million, a 41% increase from the same quarter of 2023.
For the first nine months of 2024, Alamos produced 426,800 oz. at an AISC of $1,268 per oz. The company reported record net revenue of $971.1 million, up from $768.7 million. Adjusted EBITDA earnings were $484.3 million. Adjusted net earnings were $225.7 million ($0.56 a share), up from $159.2 million ($0.40 a share). Free cash flow after capital expenditure of $284 million was $218 million. Alamos had net cash at Sept. 30 of $291.6 million, up from $224.8 million.
With the recent decision to commence construction at the Lynn Lake mine in Manitoba, Alamos expects production to increase by 7% to 580,000-630,000 oz. in 2025 and 24% by 2027 to 680,000-730,000 oz. It will then grow again as Lynn Lake comes into production in early 2028 with average annual production of 176,000 oz. AISC per oz. is expected to fall slightly to $1,250-1,300 per oz. in 2025, then fall approximately 10% to $1,125-1,225 per oz. by 2027 with the Phase 3 expansion of Island Gold.
Alamos pays a quarterly dividend of $0.025 per share ($0.10 a year), equivalent to a 0.32% yield.
Alamos remains attractive for its growth in production, with falling AISC costs, mines in politically stable and mining friendly jurisdictions, and the possibility of a takeover by a larger miner looking for production and growth from Canadian assets.
Gavin Graham is a veteran financial analyst, money manager, formerly Chief Investment Officer of BMO Financial, and a specialist in international investing, with over 35 years’ experience in global investment management.
Notes and Disclaimer
Content © 2025 by Gavin Graham. This article first appeared in The Internet Wealth Builder newsletter and has been edited. Used with permission.
The commentaries contained herein are provided as a general source of information, and should not be considered as investment advice or an offer or solicitations to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication, however, accuracy cannot be guaranteed. Investors are expected to obtain professional investment advice.
The views expressed in this post are those of the author. Equity investments are subject to risk, including risk of loss. No guarantee of performance is made or implied. The foregoing is for general information purposes only. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.
Image: iStock.com/Nordroden
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