UBS: The bullion bull run is set to continue (and the 5 ASX stocks they like most)

Despite the gold price pulling back a touch over the past week, amid post-US election dollar strength and delayed rate cut expectations from the Fed, UBS remains bullish on the gold outlook according to a recent research report.

According to the note, UBS sees “room for further strategic allocations and expecting the yellow metal to make new highs through 2025. The US Red Sweep, strong diversification buying interest and elevated global uncertainty to continue to support prices higher”.

The investment bank has subsequently updated its price forecast to (US$/oz) -85/+$75/+$100/+$100 over 2024-28, making its price forecast 6-14% above consensus over the period.

Digging a little deeper into those numbers and looking past the short-term headwinds from a stronger greenback and potential for higher-for-longer rates, UBS sees a “period of consolidation before gold continues to make higher highs and forecast US$2,900 by end of 2025 and US$2,950/oz by end of 2026.

"We expect this should be driven by continued strategic gold allocations and official sector purchases in a backdrop of high macro volatility and persistent geopolitical risks".

The outlook for miners

UBS is equally bullish on the gold miners, noting that the key catalyst for them to outperform remains delivering on production guidance and subsequent generation of free cash flow.

"The combination of already strong balance sheets and strong cash generation should drive further cash returns (dividends and buy-backs)".

Top picks

UBS’ pick of the litter is Northern Star (ASX: NST), within a basket of Perseus (ASX: PRU), Gold Road Resources (ASX: GOR), Genesis Minerals (ASX: GMD), and De Grey Mining (ASX: DEG). 

Interestingly, despite the gold price forecast update, UBS has left its ratings for individual gold stocks unchanged. However, it has lifted target prices by up to 4%.

"We remain overweight the gold sector given our constructive outlook for the price and continue to see value in the equities".

Below is a table from the research note, summarising UBS rating on the ASX gold names in coverage. 

What others have to say

For each of the names that UBS likes (NST, PRU, GOR, GMD and DEG), I’ve done a sweep of the Livewire platform to see what other fund managers/investment banks think.

Northern Star

Macquarie is also bullish on NST, with my colleague Kerry Sun writing the following in a wire in September;

Among the large-cap gold stocks, Northern Star stands out with the most significant EPS upgrades, averaging 25% over the next five years. This is attributed to its higher cost base, which provides greater leverage to gold price movements, and its lack of copper exposure.

Although it’s a while back, Daniel Sullivan, Head of Global Natural Resources and Portfolio Manager at Janus Henderson Investors, nominated Northern Star and De Grey Mining as his top picks in the gold space back in April, on an episode of Livewire’s Signal or Noise.

Perseus Mining

PRU was also nominated as a preferred smaller-cap name by Macquarie in that same September wire mentioned above, with the bank highlighting its strong cash generation (free cash flow yield of 12% in FY25) and development outlook.

Gold Road Resources

There’s not much coverage on the platform on this one, although it did come up in some analysis from my colleague, Carl Capolingua, who put together a wire on the top 10 highest rated ASX gold stocks in August.

DEG, GOR and PRY also made the top 10 in terms of consensus ratings.

Genesis Minerals

GMD was discussed on a recent episode of Buy Hold Sell, with varying opinions from guests Sam Berridge from Perennial and David Franklyn from Argonaut.

Berridge rated GMD a BUY, saying the following;

I'll stick a buy on this one. I mean it has run quite hard, but it does have something which is reasonably rare and more important in this day and age, which is permitted growth.

They still need to tick a few boxes for Tower Hill, but their Leonora and Laverton operations can grow organically without having to run foul of any permitting requirements, as we see tripped up Regis Resources recently. So I think that, along with no hedging, and good exposure to the gold price, should continue to see it keep going.

Franklyn was a little more subdued, rating it as a HOLD and saying the following;

I've got it as a hold. The management team is one of the best in the business. It's roughly going from 150,000 ounces now to say 300,000 by 2028. And then as you're saying, up to 400,000. So that looks good. Costs are a bit high. A bit of work to be done to bring the operating costs down. Tower Hill's a great asset, but I just think it's priced in, so we've got it as a hold.

De Grey Mining

As noted above, Janus Henderson’s Daniel Sullivan likes De Grey, whilst the stock was also discussed on the same Buy Hold Sell episode mentioned above. This time, the stock received more polarising opinions.

Perrenial’s Sam Berridge rated the stocks a SELL, saying the following

It's a sell for me. It is almost a producer. The record of these companies or gold stocks going into production is littered with poor returns. Precious few companies have managed this transition quite well and I think that if you want exposure to the gold price, you are probably better off placing it elsewhere until these guys get up and running.

Argonaut’s David Franklyn was more bullish, rating the stock a BUY and saying the following;

I've got it as a buy. So, taking a different tack, I get the points that Sam's made. It's got to execute on the development and there's risk associated with that. CapEx is probably going to be higher than what they would like and there's going to be issues being a refractory-type project. But, having said that, it has a market cap of $3 billion, $900 million cash, 85kms from Port Headland, 550,000 ounces a year for a very long time - it's a rare asset, should be owned by a global major, and I think it's a buy.