Buy Gold

Jonathan Poland
3 min readOct 6, 2023


The price of gold hasn’t caught up to the rates of inflation we’re seeing. The last time there was a real financial crisis was 2008. Between 2003 and 2007, the S&P 500 traded at an average 2.5x the price of gold per ounce.

Then, from 2008 to 2013, the price of gold rose 160%, and even as the S&P 500 rebounded, it was still priced on par with gold. Over the last 5 years the same dynamics are coming into play, with the price per gold on the S&P around 2.3x.

If 2024 proves to be a year the market crashes, gold could easily shoot up to $5,000 per ounce. In any event, it’s good to have some; however, if the price does rise it is even better to own gold miners.

Two Gold Stocks

Gold miners look incredibly cheap right now and it’s always better to buy the leaders. Leaders have structural advantages, more pricing power and efficiency at scale.

“In competition, favor the strong over the weak. Strong brands and companies gain more over time. — Warren Buffett”

If given the choice, investors should favor a monopoly, duopoly or oligopoly over fragmented industries. The top 5 companies control around 30–35% of total global gold production and the biggest miners have a quasi-oligopolists that indirectly influences benchmark gold prices through supply.

There are two clear leaders:
Barrick Gold + Newmont Corporation.

Barrick Gold (GOLD)

Barrick Gold is the largest gold producer in the United States with six Tier One gold mines, which form the backbone of the company’s production. These mines all have rolling 10-year plans ensuring the ability to generate substantial free cash flow for the next decade and beyond​.

It’s main assets are in the state of Nevada, where Barrick produces more than 3 million ounces a year through a joint venture with Newmont on several large mines including Carlin, Cortez, Turquoise Ridge and Goldstrike. The company mines another 1.5 million ounces from Argentina to the Ivory Coast for a yearly total exceeding 4.5 million ounces of gold.

In total, Barrick Gold has 76 million ounces of proven gold reserves. It also has 150 million ounces of silver and 12,000 million pounds of copper, among others. That equates to $185 billion in total economic value. More importantly, Barrick’s all in sustaining costs (AISC) is projected to fall between $1,170 and $1,250 this year. That equates to roughly $44 billion of profit on the gold reserves alone, which leaves plenty of margin for the company to turn huge profits for years to come.

Barrick generates north of $3 billion in gross profit on $10.8 billion in revenue. It has a market value of $25 billion, an almost equal amount of debt and cash, and what looks like an upside of at least 100%. That’s at today’s commodity prices. Imagine if gold, silver, copper move much higher?

Newmont Corporation (NEM)

Newmont is the world’s largest gold producer, averaging more than 6.2 million ounces a year with an all in sustaining cost from $1,150 to $1,250. As far as total reserves, Newmont has 96 million ounces of gold, 6.8 million tonnes of copper, and a staggering 600 million ounces of silver. That’s a staggering $172 billion plus $54 billion plus $12.6 billion in total revenue potential, at current prices. That equates to at least $55 billion of profit on the gold reserves alone with the cost to mine the other metals lower net net.

From a financial standpoint, Newmont generates $2.6 billion in cash from operations on $11.1 billion in revenue at 34% gross margins. As with Barrick, Newmont suffers from heavy regulation due to its environmental impact, and the regulations can vary greatly from one jurisdiction to another making it expensive legally to keep up. Further costs associated with mining, including equipment, labor, and energy, are also high. Each has struggled to consistently turn mining revenue into net profit.


Shareholders of Barrick and Newmont pocketed some income, but have not been rewarded with market beating performance. However, on a cyclical basis, there may not be a better trade going into 2024, especially if gold finally gets pushed higher to meet the inflation already baked in.



Jonathan Poland

20+ years helping people build better assets. These are notes from the journey. Work with me @