Gold price hits US$2,100, so why are gold mining stocks lagging?

US dollar gold prices have risen more than 13% year to date, recently hitting an all-time high of $2,100 per ounce. 

Meanwhile, larger cap gold mining stocks, represented by the VanEck Gold Miners ETF (GDX), have gained just 5% so far in 2023, with the biggest names such as Barrick Gold and Newmont falling 3% and 19%, respectively (as of the closing price on December 4).    

Junior gold stocks in general have fared even worse, with the VanEck Junior Gold Miners ETF (GDXJ), up a mere 4% year to date.  

So, what gives?  

Well to begin, rising inflation and a higher interest rate environment that has historically been supportive of the gold price has hindered miners and explorers, which have faced higher operating costs and greater difficulty in raising capital.   

This has been especially problematic for the smallest explorers, many of which have needed to issue more shares at deflated stock prices, putting further pressure on the equity values of these companies.  

Also weighing on the stock prices of gold companies is tax-loss selling season, which usually takes place in November and December.  

There is good news, however, on the near-term horizon. Resource stocks, particularly the juniors, have historically performed best during the period of December to the beginning of March, leading up to the annual Prospectors & Developers Association of Canada (PDAC) convention in Toronto. 

The so-called ‘PDAC effect’ was coined by the old timers, referring to the mining stock promoters who would talk about a big company announcement, or newsletter writer endorsement, coming at the convention that would create a wave of retail speculatory buying in the stock.  

Selling would be seen following the convention – a ‘buy on rumour, sell on fact’ event that often occurs in stock trading, although the quality companies always seem to bounce back quickly.  

Troilus Gold Corp (TSX:TLG, OTCQX:CHXMF) is one junior gold stock that has shown recent strength during a period of seasonal weakness, climbing 31% over the past month.  

Troilus is de-risking the former gold and copper Troilus Mine in Quebec towards production, having recently released an updated resource estimate that showed a 126% increase in its indicated resource, which now totals 11.21 million ounces of gold equivalent.  

The company also just closed a C$15 million equity financing, which will be used for further exploration work at Troilus as well as a feasibility study that is expected to be completed in early 2024. All of which should produce plenty of news flow and stock price catalysts in the coming weeks and months.  

TRX Gold (TSX:TNX, NYSE-A:TRX) Corp stock also seems set to attract further investor interest. Its shares have gained about 2% over the past month and 20% year to date.  

The company is rapidly growing gold production from its two million ounce plus Buckreef project in Tanzania.  

TRX recently announced record 2023 gold production of 20,759 ounces, revenue of $38.3 million, and net income of $7.0 million.  

The company is also forecasting 2024 annual gold production at Buckreef of between 25,000 and 30,000 ounces at a total average cash cost of $800 to $900 per ounce, while targeting yearly production of 100,000 ounces plus beyond 2025.  

Troilus Gold and TRX Gold (TSX:TNX, NYSE-A:TRX) are just two examples of success stories in the junior gold space. That said, the environment looks highly favourable for gold stocks going into 2024.  

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