Energy shortages drive costs higher | Gold Sector Update

Together, these dynamics have driven cuts of 10-20% to producer earnings forecasts for FY26 and FY27, with open pit miners bearing a greater cost burden than their underground counterparts.

On the gold price, the pathway to US$6,000/oz remains intact but has been pushed back by nine months to reflect the recent selloff. The structural drivers underpinning the long-term bull case are unchanged. On costs, higher diesel prices have prompted a 3-5% uplift to cost assumptions across the producer coverage universe for the remainder of 2026, with energy prices expected to begin normalising in 2027. These increases translate to AISC rises of 4-5% for open pit miners and 2-3% for underground operators.

Despite the near-term headwinds, the medium-term outlook for gold remains constructive, with the long-term price target and key demand drivers firmly in place. Price targets across the coverage universe have been trimmed by 10-15% on average, reflecting both the softer earnings outlook and the recent spot price movement.

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