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Gold Miners Are Cheap

Valuations reflect investor expectations for gold prices that are well below our long-term forecast.

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Kristoffer Inton: Fed rate-hike worries have created an opportunity to buy gold miners at a discount. The market is rightly concerned about the impact of higher rates and investor demand for gold, but a narrow focus on investor demand overstates its importance to gold's long-term outlook. 

Over the next decade it will be jewelry demand, not investor demand, that drives the gold market. Led by China and India, we expect jewelry demand to account for two thirds of gold demand by 2020 and that assumes a deceleration in jewelry demand growth for those two countries. We expect ETF and central bank purchases will account for only 5% of the market by that time. 

Kristoffer Inton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.