Surging bullion prices are strengthening the miners’ finances and driving questions about capital deployments. As the leading financial institutions don’t expect the gold to lose its luster anytime soon, the latest commentary suggests potential mergers and acquisitions volatility if cash remains sitting on balance sheets.
According to Surbiton Associates, companies like Northern Star Resources (OTCPK: NESRF), Ramelius Resources (OTCPK: RMLRF), and Evolution Mining (OTCPK: CAHPF) are sitting on cash and bullion reserves far beyond their current operational needs.
“The rise in the gold price in the last two years alone has been remarkable,” Sandra Close, the firm’s director, said per Mining Weekly. She cited political instability, rising geopolitical tensions, and strong investor demand.
“The concern is that the larger the cash reserves become, the more the company may become a tempting takeover target,” she added. Close also noted that with acquisition costs climbing and asset valuations inflated, the miners may face pressure to return capital to shareholders through dividends or other measures.
However, if gold equities begin distributing excess capital via higher dividends, it could trigger a broader market rebalancing, drawing capital away from fixed income and into yield-bearing equity alternatives, thereby raising costs in the debt market. Thus, higher volatility remains inevitable – either in the bond or equity market, and leading institutions seem to be aware of this scenario.
Citigroup raised its three-month gold forecast to $3,500 per ounce, citing a deteriorating US economic outlook and increased inflation risk tied to trade tariffs. The bank now expects gold to trade in the $3,300 to $3,600 range.
“US growth and tariff-related inflation concerns are set to remain elevated during 2H’25, which, alongside a weaker dollar, are set to drive gold moderately higher, to new all-time highs,” Citi said.
Last week’s disappointing labor market data intensified expectations of policy easing. July’s nonfarm payrolls showed just 73,000 jobs added, with June’s figure revised sharply lower to 14,000. The surprise included two dissenting votes at the Federal Reserve’s policy meeting, the first split decision since 1993, strengthening speculation of a rate cut in September. According to the CME FedWatch Tool, markets are now pricing in an 81% probability of such a move.
In addition to slowing growth, Citi flagged rising institutional credibility concerns regarding the Fed and other US data providers. The bank also highlighted elevated geopolitical risk, particularly from the ongoing Russia-Ukraine conflict. Since mid-2022, Citi estimates gross gold demand has surged by more than one-third, helping push prices near historic highs. The bank attributes this to rising investment flows, moderate central bank buying, and robust jewelry demand despite higher prices.
Other institutions have taken an even more bullish stance. Fidelity International believes gold could rise to $4,000/oz by late 2026, while Goldman Sachs also sees the potential for gold to hit $4,000 with continued fiscal stress.
Looking ahead, FED Chair Jerome Powell is under considerable internal and external pressure to cut in September. However, with his term expiring next May, markets are also bracing for a successor more accommodating to President Donald Trump’s repeated calls for lower rates, raising the prospect of further dollar weakness and added tailwinds for bullion.
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