Our Long-Term $1,100 Gold Price Forecast Unchanged
We don't expect recent gold price movements to have a massive impact on our gold miner fair value estimates.
With gold prices in a seeming free fall over the past few trading days, we want to remind our clients that our gold miner valuations have incorporated a long-term gold price assumption of $1,100 (in real terms) since April 2011. We base our long-term forecast on a look at the marginal cost of production. Our gold price view also incorporates our belief that central bank buying of gold can't continue interminably. For a summary of our arguments, please see our April 20, 2011, article, "We See Gold Going Lower in the Long Term" and our Feb. 22, 2012, article, "Are Central Banks Moving the Gold Market?"
We do not see a need to change our long-term gold price forecast. As we use discounted cash flow models to value our gold miners, and the bulk of a company's valuation stems from the cash flows we expect it to generate over the long term, we don't expect recent gold price movements to have a massive impact on our gold miner fair value estimates. However, our forecasts incorporate COMEX futures prices to project cash flows in years 2013-15 of our models. To the extent that lower near-term prices hurt near-term cash flows, our fair value estimates may fall as we update our models. Higher-cost miners' valuations are more likely to suffer in this environment. Further, as expectations for near-term operating cash flows fall, we may see gold miners defer or shelve expansion projects in order to preserve free cash flows. Dividend cuts may also be on the horizon, as dividend payouts had been ratcheted up aggressively as gold prices climbed.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.