Gold is trading at record levels and gold miners are printing cash

Gold prices hit a seventh record high for the year, reaching US$2,929 an ounce on Friday – and that's fuelling some serious cash flows for the local gold sector. The demand for bullion has soared amid a never-ending barrage of Trump tariffs and signs that progress on lowering inflation may be slowing.

US inflation unexpectedly rose by the most in nearly one-and-a-half years in January, with consumer prices up 0.5% month-on-month compared to expectations of a 0.3% increase. Historically, gold prices tend to rise when inflation picks up, as it serves as a hedge against inflation.

Gold prices have surged 47% over the past year and 11.5% year-to-date, marking a relentless rally with no weekly declines since mid-December.

Gold price chart (Source: TradingView)

Record earnings

Two of the market's largest gold miners – Northern Star Resources and Evolution Mining – reported first half earnings this week, showcasing record earnings, dividends and a robust balance sheet.

Northern Star delivered some eye-watering numbers, including:

• Revenue up 28% to $2.86 billion

• Operating cash flows up 49% to $1.25 billion

• Net profit after tax up 155% to $506.4 million

• Interim dividend up 66% to 25 cents per share

• Cash and bullion position up 12% to $1.21 billion

• Reaffirmed FY25 production guidance of 1,650-1,800k ounces of gold

"Northern Star offers significant gold price leverage to investors. And we continue to gain strength from the simplicity of our gold-only portfolio with globally significant scale in the low risk jurisdictions of Western Australia and Alaska," highlighted CEO Stuart Tonkin.

Evolution more than doubled most of its key metrics, including:

• Record underlying net profit of $385 million, up 144%

• Record group cash flow of $273 million, up 420%

• Interim dividend of 7.0 cents per share, up 250%

• Material deleveraging, with gearing now 23% compared to 30% a year ago

• Reaffirmed FY25 production guidance of 710-780,000 ounces of gold and 70-80,000 tonnes of copper

“The tailwinds of a record high US dollar gold price and an Australian dollar trading in the low-60 cents to the US dollar put the current spot gold price at over A$4,600 an ounce. That's over A$700 higher than the price you realised in the first half of this financial year," management said at the company's earnings call.

Valuations are full

Despite soaring profits, shares of Northern Star and Evolution have surged 43% and 116% over the past year, respectively.

UBS analysts called Evolution's half-year result "good," but after a strong rally, they believe the upside is priced in. Following their review, they downgraded the stock to "Sell" and slightly lowered their target price to $5.45 (from $5.40), implying a 12.7% downside from Thursday's close of $6.25.

Citi analysts took a similar stance on Northern Star, rating it "Neutral" with a $17.90 target — around 2% below current levels. Valuation was the key concern, though they acknowledged positives such as a strong balance sheet, solid management, and further production growth.

While both stocks may seem expensive, a rising gold price could challenge analysts’ cautious outlook. All eyes are on the psychological US$3,000 level — if it breaks through, analysts may be forced to raise their targets, or stocks could simply get even pricier.