October Gold Rally and Key Earnings Insights

Monthly gold market and economic insights from Imaru Casanova, Portfolio Manager, featuring her unique views on mining and gold’s portfolio benefits.

Gold Hits Record Highs in October Amid Economic Shifts

Gold prices continued to rally in October, reaching new highs throughout the month and closing at a record $2,787.61 per ounce on October 30. Key U.S. economic indicators—including the jobs report, CPI¹, retail sales, PMIs², consumer sentiment, Q3 GDP, and PCE³—signaled ongoing economic progress.

Gold equities had a mixed performance. The NYSE Arca Gold Miners Index (GDMNTR)⁴ rose by only 1.42%, while the MVIS Global Juniors Gold Miners Index (MVGDXJTR)⁵ outperformed gold, gaining 5.62% over the month.

By the end of October, markets anticipated a slower pace of the U.S. Federal Reserve (Fed) rate cuts compared to September’s outlook. Gold showed strong resilience, reaching record highs despite a stronger dollar (up 3.17%) and rising Treasury yields (with the 10-year yield up by 50 basis points). Gold likely benefited from weakness in U.S. equities, as the NASDAQ⁶ and S&P 500⁷ declined by 0.49% and 0.92%, respectively.

On October 31, the UK’s Autumn Budget 2024 was released, impacting both UK and global markets amid concerns that the budget could spur inflation and prompt the Bank of England to delay rate cuts. In response, gold dropped over $40 per ounce, ending the month at $2,743.97, an increase of $109.39 per ounce or 4.15% overall for October.

Newmont’s Earnings Miss and Revised 2025 Guidance Impact Gold Sector

A key factor influencing the sector’s performance in October was the sharp sell-off of Newmont’s (4.02% of Strategy net assets) shares on October 24. The previous day, Newmont reported Q3 2024 adjusted EPS⁸ of $0.81, missing the consensus estimate of $0.86. While this slight earnings miss was largely due to higher costs, it was somewhat offset by positive news of strong share repurchases, debt reduction and a quarterly dividend of $0.25 per share.

Newmont expanded its share buyback program to $3 billion (up from $1 billion), with $750 million repurchased so far this year. Additionally, the company reduced its net debt by $483 million year-to-date, targeting a reduction to $5 billion by year-end, down from $6 billion. As of Q3, Newmont's balance sheet remained robust, with $3 billion in consolidated cash, approximately $7.1 billion in total liquidity and a net debt-to-adjusted EBITDA⁹ ratio of 0.9x. The company also made progress on non-core asset sales, achieving $1.475 billion in sales year-to-date, putting it on track to surpass its $2 billion target.

During the October 24 conference call, Newmont issued preliminary 2025 guidance that fell short of expectations. The company projected 2025 production at around 5.6 million ounces, down from the previously anticipated 6.0 million ounces. It also indicated that costs would remain steady with 2024 levels, contrary to market expectations for year-over-year reductions. These revisions, along with weaker Q3 results and a higher cost outlook for 2024, drove Newmont’s shares down nearly 15% that day. As a sector leader, Newmont’s performance influenced the broader market, with most gold mining equities declining on October 24, despite a 0.76% increase in gold. The GDMNTR ended the day down 2.8%.

Investor Concerns in Gold Mining Revealed by Newmont’s Sell-Off

Newmont’s recent sell-off highlighted the key risks that concern investors in gold mining equities, explaining the market’s intense, perhaps exaggerated, reaction:

1. Meeting Expectations – Consistently meeting targets is critical for the sector. While projecting production, operating and capital costs is complex, it’s essential for companies to deliver as promised to build investor confidence. Underperformance or frequent revisions may not always impact the value of long-lived assets like gold mines, but markets closely track each company’s ability to execute on their plans as an indicator of effective risk management. Companies that adopt cautious, precise guidance are more likely to meet or exceed expectations and may benefit from higher valuations as a result.
2. Margin Expansion and Free Cash Flow Generation – Following recent inflation-driven cost increases, investors are focused on the industry’s cost management. A main concern raised by Newmont’s report is whether its higher cost outlook signals a broader trend for the sector. With inflationary pressures easing and companies working to control costs, industry costs are expected to stabilize, and margins should expand as gold prices rise. Investors seek assurance that companies are achieving record margins and free cash flow amid record gold prices.
3. Delivering on Growth Strategies – Investors are carefully watching companies’ approaches to growth, from mine expansions and new projects to acquisitions. While sector consolidation, such as Newmont’s acquisition of Newcrest, can deliver long-term benefits, integration also brings risks and complexities. Effective capital allocation and solid execution on growth initiatives are key to maintaining investor confidence, though acquisitions may temporarily pressure stock performance.

Agnico Eagle’s Strong Q3 Results Boost Sector Confidence

Newmont kicked off the earnings season, followed by another industry leader, Agnico Eagle (5.07% of Strategy net assets), on October 31 (with results released after market close on October 30 and a conference call on October 31). Agnico’s strong Q3 2024 results provided exactly the boost the sector needed, delivering solid financial and operational performance, reaffirming yearly guidance, and presenting a positive outlook on costs, inflation, and project progress across all key areas.

1. Meeting Expectations – Agnico Eagle exceeded earnings expectations with an adjusted EPS of $1.14, above the consensus estimate of $1.01. Both production and costs for the quarter met projections, and the company maintained its 2024 guidance, aiming for 3.35 million ounces of production and all-in sustaining costs of $1,225 per ounce at the midpoint.
2. Margin Expansion and Free Cash Flow Generation – Agnico Eagle reported record operating cash flow and free cash flow for the quarter. The company reduced net debt by $375 million, bringing the year-to-date total to $1 billion, and improved its net debt-to-EBITDA ratio from 0.29x to 0.15x. Agnico declared a quarterly dividend of $0.40 per share and repurchased $30 million in shares, emphasizing its commitment to returning capital to shareholders, with $700 million returned year-to-date. On cost and inflation, Agnico noted that productivity improvements are stabilizing costs across its mines. Labor, which accounts for 45% of its cost structure, is projected to have a 3% inflation rate in 2025, down from 4.5% in 2023. Overall costs are expected to increase by about 5% year-over-year, supported by falling diesel and power costs and stable contract renewals. The company also reported no significant inflation in capital costs.
3. Delivering on Growth Strategies – Agnico reported steady progress on its Detour Complex, Odyssey and San Nicolas projects, with key infrastructure developments and ongoing permitting activities. Positive exploration results were released for Detour Underground, Hope Bay and East Gouldie. Agnico continues its strategy of small equity investments in geologically favorable, politically stable regions, including its recent investment in ATEX Resources (Chile), viewing it as a disciplined, early-stage approach to establish a strategic presence in a promising copper mining area.

Agnico Eagle’s Strong Results Overshadowed by Market Drop

Unfortunately for Agnico Eagle, its stellar report coincided with Halloween and a spooky day for gold, which traded down more than $40 per ounce, so Agnico shares didn’t gain on the day. Perhaps the market has come to expect Agnico to consistently meet or beat expectations as it has done historically, earning a premium valuation in the sector.  One thing is clear, delivering against plans, realizing margin expansion as the gold price increases, and executing on a disciplined and sustainable growth strategy are the key ingredients for outperformance in the gold mining sector.