Gold mining stocks offer better returns than bullion: Rational Equity Asset Management

Rational Equity Asset Management contends that gold and silver mining equities offer superior returns compared to the metals themselves. Their white paper, 'Beyond Bullion,' highlights that investments in mining equities have generated significantly higher returns than physical gold, Indian gold ETFs, and gold ETFs proxied by the VanEck Gold Miners ETF.

Since August 2023, gold mining equities have delivered a 278% return, while Indian gold ETFs and physical gold have seen 153% and 130% returns respectively. The firm attributes this to a widening gap between gold prices and miner valuations, driven by a supply-demand imbalance due to long industry lead times. Large-cap miners like Newmont and Kinross are generating free cash flow yields of 8-10%, while mid- and small-cap producers offer returns of 15-35%.

Silver, facing a structural supply deficit for the sixth consecutive year, is poised for even greater gains. The recent correction in precious metals is seen as a market reset rather than a trend reversal. Indian investors have largely avoided gold mining equities, and the report suggests GIFT City's IFSCA-regulated structures as an avenue for resident HNIs and NRIs to access global mining funds.

With approximately ₹200 crore in assets under management, Rational Equity's findings present a compelling case for investing in gold and silver mining equities.