Its a Bull Market for Gold Stocks: But Here are 4 things that could go wrong and investors must beware of!

Just because it is a Bull Market for Gold Stocks, it doesn’t mean things cannot go wrong for individual companies. So investors buying individual gold stocks need to be wary of what could go wrong.

This may be saying the blatantly obvious, but it is easy to think you can do no wrong buying gold stocks in a bull market as strong as this – the gold price is US$3,448/oz as of April 22, 2025 which is more than double what it was in October 2022 and is over A$5,000/oz!

But things can go wrong for gold stocks, and if they do, the impact may be more magnified than if it was a ‘normal market’ or even a ‘bear market’. So, here are 4 of the most likely misfortunes that can fall upon gold stocks (in any market) that investors need to be aware of.

4 things that can go wrong for gold mining stocks, even in a bull market for gold stocks

1. Transactions falling through

There’s a lot of Gold M&A going on right now. According to S&P data there were US$19.3bn in gold M&A deals in 2024 worldwide – nearly thrice as high as all base metals ($7.23bn). The irony is that gold M&A was slightly down on 2023 when it surpassed US$20bn, but 2025 is set to be a booming year with deal values in Q1 of 2025 up 53% year on year, according to Discovery Alert. Some pending deals include Northern Star’s $6bn purchase of De Grey and Ramelius‘ merger with Spartan Resources.

While these deals are unlikely to fall through, there is the risk of any gold M&A deal (or an M&A deal in any sector) not going ahead. This can occur for many reasons such as:

• Due diligence uncovering factors causing the buyer to not want to purchase the company anymore;
• Regulators blocking the deal for whatever reason;
• Shareholders of the buyer or target company not approving of the deal (either in a vote or by major shareholders voicing disapproval); or
• Management of the target company rejecting advances.

This can cause major corrections to the share price, especially if the proposed deal was a hefty premium to the share price.

2. A company’s Hedge book going wrong

Because commodity prices are unpredictable, companies engage in ‘hedging’. This means they lock-in price agreements for commodity shipments for years in advance.

Hedging is in effect betting on the gold price and became popular in the late 1990s when the gold market was dour and the tech market was running hot – the two were interrelated. In 1999, the peak of the dot com bubble, there was over 15 million ounces more of gold hedged than there was produced that year (according to Van Eck).

If a gold stock bets wrong, it can lead to consequences – just ask Bellevue Gold (ASX:BGL) that had to raise over $150m earlier this week in part due to hedging errors. Bellevue will spend over $110m of that $150m just to escape erronous contracts. It locked in contracts at a price of US$2,135 when the gold price is now above US$3,400. Of course, unideal production figures are another problem for Bellevue – and more about that shortly – but it would have to raise a lot less money had it not hedged incorrectly.

3. Companies missing production targets

Gold mining companies often provide production guidance, and sometimes earnings guidance too. If they miss that guidance, they will be punished. This has happened with Bellevue which cut its full-year guidance by 22% to as little as 129,000 ounces having previously aspired to produce almost double that amount annually by 2028.

It had previously indicated a poor production figure for Q1 of 2025 of 25,000 ounces but had told investors it was a one-off. Turns out now that it was not, blaming ‘some localised geological complexity and some suboptimal mining practices during a rapid ramp-up in mining rates during the quarter’.

4. Key figures departing

Founded-led companies are rarer in the gold space compared to other sectors, particularly technology. But when a company’s founder or a long-term serving executive departs, it can lead to months of uncertainty amongst a company’s investors as to what the future holds.

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