Although the global gold industry’s market capitalization has recently surged, it remains below previous highs when compared with the broader equity market and key valuation benchmarks, according to BofA Securities analysts.
Data from the S&P/TSX Global Gold Index indicate that the sector’s total market value now slightly exceeds $550 billion. This is nearly double the cyclical peaks seen in 2011 and 2020, when valuations reached $334 billion and $331 billion, respectively. It is also more than three times the 2022 cycle low of $170 billion and eight times the 2016 trough of $70 billion.
Despite this rebound, gold’s relative weight in global equities has lagged. “As a percentage of total world equity market capitalization, the gold sector is now 0.39%,” BofA noted. “While this is roughly in-line to the 2020 peak of 0.38%, it is sharply lower than the 2011 peak of 0.71%.”
Valuation metrics paint a similar picture. On a next-12-month EV/EBITDA basis, gold companies are trading at 11.0x, below the 15.4x peak in 2020 and the 11.7x peak in 2010. Meanwhile, the price-to-net asset value ratio stands at 1.88x, compared to 2.27x in 2020 and 2.19x in 2011.
“Both measures suggest room for valuation to expand,” the brokerage said. Adjusted for spot gold prices, the multiples fall further, with NTM EV/EBITDA at 11.7x and P/NAV at 1.39x.
Gold’s price gains have helped draw attention to the sector. The metal climbed above $3,500 per ounce last week and reached a record $3,600/oz on September 5, after softer U.S. employment data boosted expectations for Federal Reserve rate cuts. As of September 7, gold was trading at $3,589/oz, up 4.1%, while gold equities mirrored the rally. The S&P/TSX Global Gold Index advanced 5.5%, the Philadelphia Gold and Silver Index rose 4.8%, and the NYSE Arca Gold Bugs Index increased 4.1%.
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