With inflation pressures not fully eased and market expectations for higher rates rising, gold prices have recently weakened in the near term, and some institutions see this as a window for future allocation. An investment bank in its latest metals and mining report said that although higher bond yields have weighed on gold, the longer-term bull case has not been broken, and the gold mining sector is still expected to benefit from improved earnings supported by higher gold prices.

The bank believes current gold prices have shown some resilience to interest rate changes. Even as US Treasury yields have at times risen to multi-year highs and the opportunity cost of holding gold has increased, markets still need to assess whether the US economy and government finances can sustain higher borrowing costs over the long term. The report noted that the US government runs a large annual deficit and net interest expense is elevated. As fiscal pressure continues to accumulate, policymakers may need to make more trade-offs in controlling borrowing costs, which could continue to support gold.

On price outlook, the bank maintains its long-term bullish stance on gold and reiterates a 2027 gold price target of $5,000 per ounce. At the same time, given the larger short-term impact from higher real rates, it has lowered its fourth-quarter gold price forecast from $4,600 per ounce to $4,400, and its full-year 2026 forecast from $4,595 to $4,511. By contrast, based on a more optimistic long-term view, it has raised its 2029 gold price forecast from $4,500 to $4,600, and its long-term price assumption from $3,500 to $3,600.

From a driver perspective, persistent inflation, expanding government debt, currency depreciation expectations and continued central bank gold purchases remain key supports for the longer-term gold trend. The report argues that these factors have not disappeared because of short-term rate volatility and may instead strengthen gold's allocation value as fiscal pressure rises.

For the gold mining sector, third-quarter earnings are expected to remain broadly resilient. Although higher diesel prices, elevated energy costs, changes in mining sequencing, maintenance activities and weather disruptions have pressured operations, miners still have some buffer in cost pass-through and operating management. Data show diesel prices rose about 12% quarter-on-quarter in the third quarter, while the average gold price fell from $4,516 per ounce in the second quarter to $4,263, a decline of about 6%. Under the combined impact of rising costs and lower gold prices, industry margins were squeezed, but the overall effect is still relatively limited, and mining margins remain above historical averages.

The bank also noted that lower third-quarter tax and royalty expenses compared with the second quarter helped improve miners' free cash flow per ounce. Looking ahead to the fourth quarter, as temporary production disruptions ease and mine operations gradually normalize, sector performance is expected to improve from the third quarter. More importantly, if gold prices later move closer to higher targets, miners' profitability could strengthen significantly, and 2027 free cash flow margins could rise markedly, offsetting persistent operating cost pressure.

However, the report also warned that rising labor costs may become a risk to watch. Most miners currently consider diesel costs manageable, but management discussions about wage and labor inflation have increased noticeably. If the issue spreads further, it could place additional pressure on profits at some miners.

In terms of market performance, gold mining stocks have recently lagged spot gold. A related gold mining ETF saw about $1 billion in outflows in September, reversing an earlier trend of partial inflows. Nevertheless, the bank believes the sector's underlying profitability remains solid, and during the gold price consolidation phase, pullbacks in high-quality gold stocks offer a more attractive allocation opportunity. It continues to favor producers with cost advantages and high-quality cash flows.