Gold prices have surged to fresh all-time highs, climbing above US$4,500 an ounce for the first time.
Investors have been turning to gold as a safe haven amid geopolitical tension and rising expectations of interest rate cuts next year. Central bank buying has also continued to support prices.
With the yellow metal hitting record levels, attention has quickly turned back to ASX-listed gold producers, including Northern Star Resources Ltd (ASX: NST).
Northern Star shares have already had a strong run over the past year. Now, with gold prices continuing to push higher, investors are starting to ask whether there could be further upside ahead.
Gold prices doing the heavy lifting
There is no doubt the current gold price backdrop has been supportive for the entire sector.
Gold is up more than 70% over the past year, marking one of its strongest periods in decades. That has flowed directly into higher revenue and stronger cash generation for gold producers across the board.
Northern Star also benefits from a weaker Australian dollar, which boosts earnings when gold is sold in US dollars but reported in Australian dollars.
As long as costs remain under control, higher gold prices generally translate into stronger margins and free cash flow for larger, established producers like Northern Star.
Operations remain on track
Northern Star's most recent quarterly update showed the business continues to perform well. Gold production remained in line with expectations, while costs were broadly stable despite ongoing inflation pressures across the mining sector.
Management also reaffirmed its full-year guidance. That was taken as a reassuring signal by the market, especially at a time when many miners are still facing higher labour and energy costs. Importantly, Northern Star continues to generate strong free cash flow, giving it flexibility to invest, reduce debt, and return capital to shareholders through dividends and buybacks.
The company's balance sheet remains in solid shape, with a strong cash position and plenty of liquidity heading into the second half of the year.
What are brokers saying?
Broker sentiment toward Northern Star remains broadly positive. Several analysts have pointed to its scale, asset quality, and disciplined capital management as key strengths.
Northern Star shares last traded at $27.01 at the time of writing.
Earlier this month, Citi lifted its price target on the stock by 17% to $28.10, reflecting stronger gold prices and confidence in the company's outlook. That implies potential upside of around 4% from current levels, assuming the gold price remains supportive.
While some brokers note that the share price already reflects a lot of good news, most still see value, particularly if gold prices stay elevated over the medium term. The general view is that Northern Star remains well positioned to benefit if strong gold prices persist, without taking on excessive risk.
Foolish takeaway
Gold smashing through record highs has created a supportive backdrop for gold producers.
Northern Star has already delivered strong returns, but the underlying business remains in good shape.
Short-term movements will always be tied to the gold price. But if gold stays near current levels, Northern Star looks well placed to continue benefiting.
That said, after the recent run, I am happy to watch from the sidelines for now. Personally, I would be looking for a more attractive entry point, potentially back in the low $20's, before getting more interested.
For investors seeking exposure to gold through a proven ASX producer, Northern Star remains a stock worth watching closely.
