KUALA LUMPUR: Trade tensions, global conflicts and fiscal pressures across major economies are reinforcing demand for gold as a safe haven, according to Franklin Templeton portfolio manager Steve Land.
“Gold has historically performed well during periods of stress,” he said, adding that structurally high government debt, persistent fiscal deficits and a greater tolerance for inflation are eroding confidence in fiat currencies.
He noted that speculative activity, particularly leveraged trading in China, helped push prices sharply higher late last year, before a correction at the end of January.
Despite this volatility, Land said the fundamental backdrop remains supportive.
“Supply remains constrained while demand continues to grow,” he said.
He pointed out that central banks have been net buyers of gold since 2008, yet still hold less than 20 per cent of total global supply, while about 45 per cent of gold exists in jewellery form.
Land said central bank purchases and inflows into bullion-backed exchange-traded funds have driven bullion prices higher at a much faster pace than mining equities, creating a notable valuation gap.
“Many miners are trading below historic multiples, with attractive free-cash-flow yields and enterprise value-to-cash-flow metrics,” he said.
“We estimate valuations have lagged gold spot prices by about 20 per cent over the past couple of years.”
In his view, this disconnect is not justified.
“It reflects investor perception rather than fundamentals,” he said, noting that while investors remain wary due to past cycles of cost inflation and capital misallocation, the industry has evolved.
“Miners today have stronger balance sheets, better capital discipline and higher shareholder returns.”
He added that at elevated gold prices, miners offer significant operational leverage, with earnings and cash flow rising faster than bullion prices.
Fundamentals also support higher equity valuations, Land said, citing record profits for many producers in the third quarter of 2025, with fourth-quarter earnings expected to be even stronger as gold averaged about US$4,150 an ounce.
While caution is warranted if prices retreat, Mr Land said miners have a substantial buffer.
“Gold would need to fall below roughly US$3,500 an ounce before sector economics start to resemble prior down cycles,” he said.
Overall, he said strong balance sheets, attractive valuations and continued merger and acquisition activity leave him constructive on gold and gold equities in 2026.
© New Straits Times Press (M) Bhd
