So, even if the gold price remains flat around current levels, its Ebitda can potentially double over the next five years – which would see the company priced at a 15 per cent free cash flow yield.
Despite the significant spike in inflation over the past 18 months, rising interest rates and a bull market in the dollar, the gold price has largely stagnated in a tight range.
The dollar and real yields are likely to subside this year, driven by rising geopolitical tensions and an increasing probability of a Fed pivot as inflationary pressures subside and recessionary risks build.
Therefore, the timing for gold exposure is opportune in both a soft and hard-landing scenario.
Given generationally low valuations, gold equities offer a very wide margin of safety.
Alison Savas is the investment director at Antipodes Partners
