AngloGold Ashanti (AU) is set to release its Q4 2025 earnings on Feb. 20. Along with the regular dividend, the company is also expected to announce an additional dividend to meet its annual payout targets. AU intends to pay half of its free cash flows to investors as dividends, and while it has already made two true-up payments following the Q2 and Q3 earnings, it should announce another one while releasing the Q4 earnings.
AU stock has risen sharply over the last two years, riding the gold price rally. However, the stock has lost over 12% from its recent highs. Let's dig into whether AU stock is a buy now ahead of the Q4 confessional.
Let’s begin by examining the recent movement in gold (GCJ26), which is the primary driver of gold mining companies’ price action. While gold has historically been perceived as a “safe” asset, that notion has been shaken in recent days. The yellow metal has been quite volatile, and the price action hasn’t been much different from what we saw with meme stocks in 2021. Meanwhile, gold prices appear to be stabilizing and have rebounded from their lows.
Why Did Gold Prices Crash?
While gold’s fundamentals look positive, the rally had started to show signs of euphoria and was resembling a bubble. In my previous article, I had noted that gold was due for a correction sometime this year, even though I was then tactically bullish. Gold prices did continue to rally and peaked in late January but subsequently crashed. I would, however, admit that the boom-bust was a lot sooner and sharper than what I had anticipated.
Several factors contributed to the crash, including the fact that the precious metal was looking overheated and ripe for correction. Firstly, geopolitical tensions eased after President Donald Trump toned down his rhetoric on Greenland—and by extension the EU. The president also took a softer stance on trade and extended the olive branch to India, lowering tariffs from 50% to 18%. The move came after the world’s most populous country signed trade deals with the UK and the EU in quick succession.
Trump's picking of Kevin Warsh as the next Fed chair also contributed to the slide in gold prices. Warsh is known to be a “hawk” when it comes to inflation (though he's been sending mixed signals lately) and is seen as more independent compared to some of the other names that were floating for the position. Central bank independence is crucial for free markets, and Warsh’s nomination came in as a relief to many, particularly in the bond market. Gold and silver prices, however, sold off as expectations of big interest rate cuts under the next Fed chair faded away. Notably, as a non-interest-bearing asset, gold theoretically does well in periods of low interest rates.
Finally, the CME Group raised margins on precious metals, which further dampened sentiments and added fuel to the crash in gold and silver prices.
Gold Prices Could Rise from These Levels
I believe gold has found a new floor at $4,500 per ounce, and prices have strong support at that level, given the buying appetite among retail and institutional customers. Central banks globally are also expected to add more gold to their reserves at the cost of the greenback. With Bitcoin (BTCUSD) prices crashing, investors are increasingly pivoting to gold, which should support prices.
To sum it up, while the apparent bubble in gold prices has burst, the long-term story looks intact.
Is AU Stock a Buy Now?
With gold prices now stabilizing, I find gold stocks attractive and used the recent dip to add more AngloGold Ashanti shares. AU has optimized its portfolio by selling stakes in some of its Tier 2 assets, which, by definition, have higher per-unit costs. At the same time, it has added Tier 1 assets, which have improved the overall quality of its portfolio and reserves. Its earnings and cash flows are expected to be buoyed by strong gold prices.
AU had a net cash position of $450 million at the end of September, which means that it held more cash than debt on its balance sheet. To be sure, it is not the only gold mining company to achieve that feat, and other companies have also used their free cash flows amid the gold price bonanza to pare debt.
Meanwhile, with the company now reaching a net cash position, it would need to take a call on capital allocation. During the Q3 earnings call, AU management said that it would discuss more on its capital allocation priorities during the Q4 earnings call. I expect the company to further increase shareholder payouts this year, given the lack of other avenues to utilize the massive free cash flows that it is generating.
Overall, investors can expect higher dividends from AU this year as it continues to share the cash flow largesse with shareholders. There is also scope for capital appreciation, as gold prices should stay strong this year, given the structural bullish story.
On the date of publication, Mohit Oberoi had a position in: AU . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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