Favourite gold mining shares and a tip to pick winners

A selective stance on gold equities following their “wild ride” in 2026 has recommended Endeavour Mining (LSE:EDV) ahead of fellow UK-listed stocks Hochschild Mining (LSE:HOC) and Fresnillo (LSE:FRES).

The report by UBS, which has 11 gold miners and streamers in its global coverage, said valuations were “generally reasonable” after peak-to-trough moves of between 40% lower and 50% higher in the MarketVector Global Gold Miners Index (GDX) so far this year.

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These swings reflected 2026’s January record gold price of about $5,400 an ounce before a correction to $4,000 in July, rebound to $4,700 in August and $4,170 an ounce by the end of September.

UBS said earnings expectations have stabilised after a powerful upgrade cycle and that through continued discipline, margins and free cash flow were attractive at prices above $4,000.

However, it warns that sustained energy and broader cost pressures will mean generally higher unit costs in 2027 that may not be fully reflected in City consensus forecasts.

UBS added: “While we remain constructive on the outlook for gold and its role in a diversified portfolio, we recommend selective gold equity exposure.”

Stock pick tip

It said investors should avoid companies with negative cost guidance or production downgrades and pay attention to merger and acquisition (M&A) risk.

The bank wrote: “We expect more M&A, and while not every deal is poorly received by the market, our strategy in large caps is avoiding potential deals and favouring sustained cash returns versus identifying potential mid/small-cap targets.”

UBS’ favoured senior gold picks are US-listed Newmont Corp (NYSE:NEM) and Barrick Mining Corp (TSE:ABX), with West Africa-focused Endeavour Mining one of its mid-tier choices.

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The FTSE 100-listed company has operating assets in Senegal, Côte d’Ivoire and Burkina Faso, as well as development projects and exploration assets on the Birimian greenstone belt.

The bank has an Endeavour price target of 4,600p, which compares with today’s level of 4,004p. Shares peaked at 5,290p on the eve of the US-Iran war before dropping to 3,422p in July.

UBS said Endeavour’s higher country risk is reflected in its relative valuation and that operational performance and visibility on cash conversions are improving.

While it believes M&A is a potential risk, UBS said Endeavour is likely to remain focused on assets in Africa and that potential divestments from larger players are likely to come at attractive valuations and be accretive.

Excluding M&A, the bank expects a further step-up in cash returns in 2026 and believes that a healthy distribution yield can be sustained in the medium term despite increasing capital expenditure that will drive about 40% growth over 2025-29.

The bank has a Neutral position on Mexico’s gold and silver miner Fresnillo, with a price target of 2,700p. This week’s report lifted the target on FTSE 250-listed Hochschild Mining by 10% to 550p, but with no change to the Neutral stance on the South America-focused company.

Updated projections in the report point to a 2027 gold price of $4,800 an ounce, followed by $4,500 in 2028 and 2029 and $4,000 in 2030. Silver is seen at $77.5 an ounce in 2027, up from the spot price near $60.

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Gold miners materially outperformed in 2025, reversing a five-year run where the GDX lagged the gold price by about 50% and the consensus price/earnings multiple de-rated by 45% from 21 times to 11 times.

Following a recent correction, UBS said the GDX is again trading towards the low end of its recent valuation range at about 12 times earnings.

It added: “Miners are better positioned today, with stronger balance sheets and a higher expected price floor, although this is offset by M&A/capital allocation risk as they look to replenish growth pipelines.”