As the U.S. shutdown looms, rotation from Treasuries into gold strengthens the case for TXG, with fair value closer to CAD 97.
On the eve of another U.S. government shutdown, investors face the same dilemma as in past crises: where to hide when confidence in Treasuries weakens. Historically, gold has been the escape valve. As outlined in Capital in Transition’s “Gold as the Ultimate Hedge”, moments of fiscal stress often drive capital out of U.S. debt and into real assets. That makes Torex Gold (TXG:CA), trading at CAD 56.93, a timely and underappreciated hedge.
- Value: Simply Wall St calculates fair value at CAD 97, leaving the stock ~41% undervalued. With safe-haven flows likely if the shutdown drags on, I believe TXG deserves a higher re-rating. A fair value of CAD 95–97 is justified as rotation into gold accelerates.
- Future: Earnings are forecast to grow 30%+ annually, supported by the Media Luna project and optimization at Morelos. In a “Great Unwinding” scenario (Capital in Transition), Torex could deliver outsized growth as gold reprices higher.
- Past: Earnings doubled over the past year, proving leverage to the gold cycle. Unlike many peers, Torex has consistently delivered operationally.
- Health: The balance sheet is flawless, with effectively no net debt. In a high-volatility macro environment, this financial strength is invaluable.
- Dividend: Torex does not emphasize dividends. Management has kept capital focused on growth, an approach that maximizes upside in a bull gold market.
Investment Thesis
At today’s CAD 56.93, TXG offers one of the cleanest ways to play a shutdown-driven rotation into gold. With a base fair value near CAD 97, the stock has 70%+ upside. Unlike some majors weighed down by legacy assets, Torex is lean, growing, and debt-free. For investors who expect prolonged U.S. fiscal instability, TXG is a compelling hedge with real re-rating potential.
Risks
Risks include Mexico’s regulatory environment and input cost pressures. But if U.S. fiscal paralysis escalates, the flow out of Treasuries and into gold could overwhelm these headwinds. For broader context on these scenarios, see Capital in Transition and the Scenarios framework.
Disclosure
I/we have a beneficial long position in TXG:CA through stock ownership. I wrote this article myself and it expresses my own opinions.
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Disclaimer
The user gmalan has a position in TSX:TXG. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
