Gold miners are about to unveil their most profitable quarter ever, thanks to record-high gold prices and stable or lower mining costs. However, gold stocks are still trading as though their earnings and gold prices are much lower, creating a significant valuation discrepancy. The upcoming Q4 and 2024 earnings results should help correct this, leading to a surge in investor interest.

Quarterly earnings reports are a critical tool for assessing stock prices, cutting through the noise of market sentiment to show the real performance of companies. Q4 results typically take longer to prepare, but they offer the most comprehensive data for the year. We won’t see the full Q4 results until mid-March, but based on historical trends, we can confidently predict that the results will be exceptional.

The best way to measure how gold miners are performing is by looking at their implied sector unit profits, which subtract AISCs from average gold prices to reveal profitability. This approach avoids distortions caused by non-cash items like asset write-downs, providing a clearer picture of how miners are doing.

In Q4’24, gold prices hit an all-time high of $2,661 per ounce, representing a 34.7% increase compared to the previous year. At the same time, AISCs for the top 25 miners are expected to be lower, driven by increased production and cost efficiencies. This combination will result in record profits, likely doubling compared to Q4’23.

Despite these impressive gains, gold stocks have underperformed, with GDX rising just 31.1% while sector profits soared by nearly 99%. This valuation anomaly can’t continue for long. As the gold miners report their best-ever results, institutional investors will begin to recognize the value of gold stocks, driving upward momentum.

Gold stocks are significantly undervalued, and with a technical breakout nearing, now is an ideal time for investors to consider allocating capital to this high-potential sector. As the results roll in, gold stocks will likely experience a significant revaluation, rewarding those who act early.