Brenton Saunders: ASX gold sector shines, but investors must be selective

The price of gold has seen an uptick in recent times, but how much higher can it go? Portfolio manager BRENTON SAUNDERS explains

• ASX gold index up 20% this year
• Two stocks to watch: Capricorn Metals and Genesis Minerals
• Find out about Pendal MidCap Fund

GOLD is up more than 40 per cent over the past year and plenty of analysts see more records ahead.

Can it keep going? And how best to gain exposure through the ASX?

“Gold is being helped by elevated inflation and strong liquidity,” says Pendal portfolio manager Brenton Saunders

Brenton manages Pendal MidCap Fund and is also a geologist with experience in gold mining and gold-related equities investing.

While no one knows for sure how far gold will run, Saunders notes that the rising price has “very quickly repaired some of the issues with balance sheets in the gold sector and elevated dividends in some cases.

“Gold companies have very high profit leverage to higher gold prices. This makes them very cash generative and, in turn, they become acquisitive.”

Saunders has long been an advocate for selected stocks in the ASX-listed gold sector.

“Gold has worked well in our portfolio.

“The gold price is up 9 per cent in Australian dollar terms year-to-date and the ASX Gold Index is up around 20 per cent. That’s been incredibly helpful to our portfolio.

“We have held positions for a long time, and it has all come together in the last three months.”

Stock examples

Saunders highlights several ASX gold stocks held by Pendal’s midcap fund including Capricorn Metals (ASX: CMM) and Genesis Minerals (ASX: GMD).

“Capricorn is a reliable, low-cost, highly cash-generative producer permitting a new project in the Murchison to effectively double production by FY 2027-28,” says Saunders.

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“Strong gold price exposure and growth make it an ideal midcap stock. 

“Genesis has taken the best of the successful Saracen (ASX: SAR) team and packaged them into a high-growth, very well-run WA gold company.

“The company is turning a series of highly systematic acquisitions in WA, made at lower gold prices, into an integrated production complex with strong growth and cash flow.”

Opportunities in cyclical industrials

Elsewhere, market focus has turned to opportunities in ASX-listed cyclical industrials, Saunders believes.

“Some stocks are looking quite attractive on a valuation perspective and cyclical headwinds associated with high interest rates are starting to abate.

“In some cases it comes down to company specifics. If stocks can address specific issues they can do well.

“During results season Domino’s Pizza Enterprises (ASX: DMP, not held in Pendal MidCap Fund) was an example. They have started to address some of the headwinds they’ve had in the last couple of years and the market was very receptive to that.”

Wall Street’s recent earnings season was reasonably strong and the current reporting season in Australia has “so far been strong too”, Saunders says.

“The share market has been strong so far this year. Share price appreciation has been relatively broad-based, though the main drivers are banks, gold stocks and consumer discretionary stocks.”

Saunders is also closely watching how potential Trump administration tariffs might impact ASX stocks.

A number have potential exposure but there is limited clarity of how and where tariffs will land.

“So far what markets were most worried about hasn’t really eventuated, and investors have just gotten on with it.”