Stock selection the key for gold investors as they await signs of peak inflation

Gold slipping below US$4,000/oz to an eight month low has naturally enough seen the knives pulled out and sent to work slicing gold equity values.

The now 28% price retreat since the record US$5,589/oz price in late January is telling stuff alright and in the short-term at least, it is in response to the rise in the US dollar to its highest level in more than a year on expectations of higher interest rates.

The new US Federal Reserve chair Kevin Warsh stirred the pot recently by saying inflation remained to be brought under control, with the market now expecting a couple of possible rate rises before the year is out.

Having said that, the crash in oil prices following the tentative Middle East peace deal can be expected to do a lot of the heavy lifting in the fight against inflation in the months ahead, assuming the peace deal sticks.

There was some recognition of that in the US 10-year bond yield falling while the dollar was spiking.

While the expectation of higher interest rates that might not come pulled gold down through the seemingly important US$4,000/oz threshold, a reversal of the same expectation could drive gold back over the threshold.

Tiime will tell. In the meantime, central bank buying as part of a global shift to de-dollarisation and concerns about the size of the US national debt have not gone away. And besides, the gold price remains some 16% higher than its CY2025 average.

So while the 30-day and 60-day price graphs look shocking, the 1-year and 5-year price graphs for gold still look great.

Having said that, until the price settles, stock selection assumes greater importance than sector buying.

And while the producers move down and up in line with US dollar gold price movements in the near-term, it will be the explorers/developers that stand to benefit most from the switch to  selective buying for the leveraged value growth that can come from the drill bit.

LAC GOLD:

The recently created Lac Gold (ASX:LAC) is one that stands to benefit.

Trading at 33c for a market cap of $72 million, Lac was created in December 2025 via the merger of ASX-listed Canadian gold explorer Ardiden and the unlisted Lac Gold, with Lac Gold continuing on in recognition of the scale of the Rouyn gold project it brought to the combination.

Rouyn lies all of 4km south of Rouyn-Noranda, a Kalgoorlie-sized town with a dash of ice in  French-speaking Quebec, and is hard up against the Wasamac gold development project owned by gold industry supremo Agnico Eagle.

More to the point is that Rouyn comes with a 15.8Mt resource grading 3.28g/t for 1.66Moz contained from a 6km mineralised corridor in the fabled Abitibi gold belt.

A historic producer, Rouyn was originally acquired in mid-2024 by veteran Aussie mining engineer Andrew Stocks and veteran Aussie geologist Matt Keegan when gold was trading at a little more than US$2,000/oz and pretty much friendless in the Canadian market.

Stocks is managing director of the merged group and Keegan is an executive director with shareholdings of 4% and 17% respectively. So they have more skin in the game than management in the average ASX-listed gold stock.

Rouyn is about as far away from the crowded goldfields of Western Australian as is possible which more than anything explains the group’s current modest enterprise value per resource ounce, which is amongst the lowest in the ASX gold sector.

Put the Rouyn project in WA, and it would be safe to assume that Lac’s market cap would be a multiple of two or three times the current $72m, particularly as its near Rouyn-Noranda location means a future development would have easy access to skilled labour, mains power, rail, and a major highway.

The project is also nestled among a number of Abitibi gold operations held by the big names of the industry with hungry treatment plants, making Lac a potential strategic partner or acquisition target.

Before those sort of considerations come in to focus, the Stocks-Keegan mantra is to continue to grow the Rouyn resource.

Drilling is continuing at the project with two rigs on site, with a third planned.

Results to hand have been impressive, including visible gold in a thin section from about 148m grading a spectacular 1,580g/t. More representative results have included 9.1m at 6.31g/t gold from 123.4m and 97.5m at 1.04g/t from 554 5m.

The next batch of results from the ongoing  drilling campaign are likely to be reported within a couple of weeks, with Lac expecting to be in a position to release an updated mineral resource estimate in the December quarter.

The steady newsflow should serve to build Lac’s profile on the ASX as the owner of a project with multi-million ounce potential in a world-class jurisdiction. It is what institutional investors, and hungry major mining companies in the region, would like to see.

If Lac only had Rouyn in the portfolio, its current modest market cap could well be considered fair enough pending the multi-million ounce potential being confirmed.

But Lac now has the former high-grade Golden Patricia mine in the prolific Pickle Lake gold district over in neighbouring Ontario in the portfolio.

The acquisition from gold titan Barrick was completed earlier this month, with Barrick retaining a 2% net smelter return royalty to ensure exposure to the potential for Golden Patricia to recapture its former glory under Lac.

The operation produced 620,000oz at a heady 16.48g/t gold between 1988-1997 when it was closed because the gold price was fetching all of US$330/oz, due in part to Peter Costello allowing the RBA to sell-off two-thirds of Australia’s gold reserve for $2.1 billion in 1997.

If Australia had lost faith in gold as a reserve asset, why should anyone else hold the yellow stuff was the feeling at the time. At today’s gold price, a similar sale would generate more than $30 billion. Funny thing, the gold market.