Gold is all the rage right now and this is Macquarie's top gold pick
Gold hits US$3,528 as Macquarie switches preference to Northern Star over Newmont, citing valuation gap and clearer outlook.
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KEY POINTS
- Gold has surged 2.5% this week to US$3,528 an ounce as foreign central banks now hold more gold than US Treasuries for the first time since 1996, signaling a historic shift away from the dollar.
- Gold is climbing thanks to a broad range of factors including looming Fed rate cuts, a potential US government shutdown, a risk-off mood for equities and more.
- Northern Star has become Macquarie's preferred large-cap gold pick after underperforming rivals created a valuation discount, despite the company offering superior growth with production expected to jump 54% by FY30.
Gold is taking its next leg up, with prices surging as much as 2.5% so far this week to US$3,528 an ounce. The breakout has been fueled by a broad wall of worries spanning equity market weakness, global trade volatility, rising bond yields and risks of another US government shutdown.
Gold price chart (Source: TradingView)
One of the key drivers has been the growing expectations that the Fed will cut interest rates at its next meeting later in September. According to CME's FedWatch tool, the likelihood of a 25 basis point rate cut for this month stands at 89.7%, with the market anticipating two rate cuts by year end.
But it isn't just lower interest rates that's making gold more attractive. Foreign central banks now officially hold more gold than US Treasuries, for the first time since 1996, according to Bloomberg. This signals the world is steadily moving away from the US dollar, and betting on gold as a store of value.
As far as ASX-listed gold miners are concerned, Macquarie switched its large-cap gold preference from Newmont (ASX: NEM) to Northern Star (ASX: NST), citing attractive valuations and clearer operational outlook after a period of underperformance has created opportunity for investors.
Northern Star becomes the preferred large-cap gold exposure, followed by Newmont (downgraded to neutral) and Evolution Mining (underperform), marking a significant shift in analyst sentiment following recent share price divergence between the companies.
Ticker | Company | Rating | Target price |
|---|---|---|---|
EVN | Evolution Mining | Underperform | $7.00 |
NEM | Newmont | Neutral | $111.00 |
NST | Northern Star | Outperform | $24.00 |
Source: Macquarie Research, August 2025
Valuation gap creates opportunity
The rotation reflects Northern Star's flat performance since June 2025, while Newmont surged 25% over the same period. This divergence has created an attractive entry point for Northern Star, which now trades at just 1.1x price-to-net asset value compared to Newmont's 1.2x and Evolution's elevated 1.7x.
The company offers the highest five-year average free cash flow yield at 5% and the strongest production growth outlook, with FY30 output expected to be 54% higher than FY25 levels.
Source: Macquarie Research, August 2025
The preference shift acknowledges that while Newmont's operational improvements are "increasingly likely" to see 2025 guidance exceeded, this upside is now "priced into expectations following particularly strong recent share price performance." In contrast, Northern Star's underperformance has created a discount despite superior fundamentals.
Newmont's appeal as an unhedged, globally diversified gold proxy with no single asset representing more than 17% of production has driven its re-rating. However, analysts note the stock has outperformed all covered names over the past three months, suggesting limited near-term upside.
Though operational momentum could see Newmont deliver its first guidance achievement since 2022.
Northern Star offers contrasting value, trading at just $16,000 per ounce of production on an enterprise value basis, compared to $24,000 for Evolution and $22,000 for Newmont. This discount persists despite Northern Star's superior growth trajectory and operational scale, including ownership of the iconic KCGM super pit and Australia's largest undeveloped gold project at Hemi.
Clear air ahead
One of the main drivers of Northern Star's recent underperformance was from the FY26 guidance it provided on 7 July. The company guided to 1,700-1,850koz of gold sales at an AISC of A$2,300-2,700/oz. This was 5.3% below Citi's forecast of 1.79 million ounces, while AISC was a 15% blowout versus their estimates of $2,181 an ounce.
With the next major catalyst being Hemi project approvals in the first half of 2026, analysts see approximately six months of "clear air" for potential re-rating. Northern Star has managed expectations conservatively, guiding first quarter FY26 production at around 400,000 ounces (22% of full-year guidance), providing adequate buffer for operational performance.
Mid-cap opportunities in Genesis and Ramelius
Among mid-cap stocks, Genesis Minerals (ASX: GMD) emerges as the standout pick following upgraded FY26 guidance that exceeded expectations. The company's five-year growth outlook is only surpassed by Capricorn Metals, with potential for further upgrades beyond its 10-year plan as it embarks on region-wide expansion projects.
Ramelius Resources (ASX: RMS) presents a compelling turnaround story after underperforming peers due to elevated hedging positions and capital-intensive expansion plans. The company is transitioning from an 8% free cash flow yield in FY26 to approximately 11% by FY28, driven by reduced capital expenditure and diminishing hedge book exposure.
Reporting season highlights
The latest reporting season proved relatively uneventful given most companies had provided guidance during June quarterly updates, though several companies provided market-friendly capital management initiatives:
Evolution Mining: earnings in-line, 13 cent final dividend brings full-year payout to 20 cents per share, slight beat on expectations
Northern Star: earnings in-line with 30 cent final dividend lifting full-year payout to 55 cents, 8% higher than expected
Bellevue Gold: underlying EBITDA beat by 17%, but statutory loss of $46 million due to hedge book closeout
Capricorn Metals: earnings miss with EBITDA down 8-10% on higher costs and finance expenses, no dividend declared as expected
Genesis Minerals: in-line results but upgraded FY26 guidance confirmed growth trajectory and mill expansion plans
Ramelius Resources: 7% earnings miss offset by surprise return of 5 cent fully franked dividend, 75% above expectations
Regis Resources: mixed results with 4% EBITDA beat but 16% NPAT miss due to higher depreciation charges
West African Resources: strong 12% EBITDA beat driven by revenue gains, though 51% NPAT beat included unexpected foreign exchange gains
West African volatility
West African Resources (ASX: WAF) delivered a solid performance with underlying EBITDA beating expectations by 12%, though results were complicated by a subsequent trading halt following a request from Burkina Faso's government to acquire an additional 35% interest in the Kiaka project.
The mixed regional performance highlights the operational and political complexities facing companies with international exposure, reinforcing the appeal of domestically-focused Australian producers in the current environment.
