UBS lifts gold price target to US$3,900, with a preference for these mid cap miners
UBS lifts gold forecasts to US$3,900/oz by 2026, predicting 15-35% earnings upgrades for miners while favouring mid-cap growth names.
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Mentioned
KEY POINTS
- UBS has lifted gold price forecasts by 9-12% across 2026-28, expecting a peak of US$3,900/oz (A$6,000/oz) by mid-2026, driving earnings per share upgrades of 15-35% for the mining sector.
- Mid-cap growth names Genesis Minerals, Perseus Mining and Vault Mineras are preferred picks, with free cash flow yields expected to reach 6-8% across the sector by FY27-28.
- Despite recent guidance downgrades from miners, the strength in gold prices has overshadowed operational challenges, with companies beginning to incorporate higher prices into reserve calculations.
UBS has upgraded its gold price forecasts and lifted price targets across ASX gold miners by up to 27%, now anticipating a peak gold price of US$3,900/oz by mid-2026 (which translates to A$6,000/oz for Australian investors)
The investment bank expects earnings per share upgrades of 15-35% for the sector in FY26-27, driven by what it describes as an "extended free cash flow harvest phase" as higher gold prices flow through to company financials.
Mid-cap growth names in focus
Despite the sector-wide upgrade, UBS is becoming more selective, favouring mid-cap growth stocks over larger producers that have already seen significant share price gains. The bank's preferred picks among mid-caps include:
"At current equity levels, we see more opportunity in our mid-cap, growth names," UBS analysts wrote, noting that value has increasingly concentrated in these smaller operators as larger companies become more expensive.
The bank downgraded SSR Mining to Neutral and Regis Resources to Sell due to recent share price gains. Evolution Mining remained Sell-rated due to its recent run and relative valuations.
Price forecasts jump across the curve
UBS lifted its 2026-28 gold price forecasts by an average of 9-12%, now expecting:
2026: US$3,825/oz (up 9%)
2027: US$3,650/oz (up 12%)
2028: US$3,350/oz (up 12%)
The upgraded forecasts put UBS approximately 20% above consensus through the price curve, with the bank's peak gold price target moving up US$300/oz to US$3,900, expected in the third quarter of 2026.
"While we see potential for some price consolidation near-term, we do not see a clear macro catalyst consistent with a sustained down-cycle," the analysts said.
Gold price chart (Source: TradingView)
Strong cash flow generation ahead
The higher price forecasts translate to attractive free cash flow yields across the sector, with UBS projecting average yields of around 6% in FY26 rising to 8% in FY27-28.
Among individual companies, Vault Minerals, Genesis Minerals, Regis Resources and Evolution Mining are expected to deliver free cash flow yields above 8% in FY26.
On valuation multiples, Perseus Mining, Vault Minerals and Regis Resources are trading at the cheapest levels among UBS's coverage universe.
The sector is trading on average FY26-27 EV/EBITDA multiples of 5.3x and 4.3x respectively, which UBS considers attractive given the earnings upgrade potential.
Companies moving past guidance downgrades
Recent reporting season disappointments around weaker production guidance and higher costs have been overshadowed by the strength in gold prices, according to UBS. Most companies provided softer FY26 outlooks due to modestly weaker production, higher all-in sustaining costs, and increased growth capital expenditure.
However, with spot gold now around US$3,700/oz, "recent guidance downgrades are in the rear view", the bank noted.
Companies are beginning to incorporate higher prices into their reserve and resource calculations, with increases of around 20% year-on-year, though UBS expects this process to continue with broader asset optimisation to follow.
Large cap preferences
Among the major producers, UBS maintains Newmont (ASX: NEM) as its preferred large-cap pick, upgrading its price target by 27% to $140 while retaining its Buy rating. The analysts value Newmont on 6.5x 12-month forward EV/EBITDA, below its 10-year average of 7.6x.
Northern Star Resources remains rated Neutral with a $21.10 price target as it enters a high capital expenditure growth phase, while Evolution Mining stays at Sell with a $7.90 target.
Macro backdrop remains supportive
UBS points to several factors supporting higher gold prices including US Federal Reserve rate cuts, geopolitical uncertainties, and broadening investor interest in the precious metal.
"Gold's investor base continues to broaden and allocations still have room to rise," said the analysts, describing gold as a strategic diversification asset against macroeconomic risks and geopolitical uncertainties.
The bank expects the current supportive environment of trade uncertainty, weaker growth prospects, higher inflation, and geopolitical risks to continue driving demand for safe-haven assets like gold.
While acknowledging some valuations are becoming stretched after the recent rally, UBS maintains an overweight rating on the ASX gold mining sector, expecting the rally to extend into next year before stabilising at higher levels.
