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Trade anxiety, geopolitics and threats to the US central bank’s independence have driven investors to the safety of gold, sparking a massive rally in miners of the precious metal.
The NYSE Arca Gold Miners Index hit an all-time high and is on track to end the session at a record on Friday. It’s the first new peak since 2011 when investors were snatching up safe-haven assets amid Europe’s debt crisis and the first US credit rating downgrade. This time, a new sense of uncertainty has sent some of the largest stocks in the benchmark soaring, with Newmont Corp., Agnico Eagle Mines Ltd., Wheaton Precious Metals Corp. and Barrick Mining Corp. all gaining more than 80% this year.
Investors contending with global instability from trade wars and conflict in the Middle East and Ukraine, are once again seeking assets that offer shelter. US President Donald Trump’s efforts to oust Federal Reserve governor Lisa Cook and a lack of clarity on the central bank’s plan on lowering interest rates have further ignited gold prices, and with it the companies that mine it.
“All my gold companies, the return on equity has proven to be almost twice as high as it was last year because the margin that they get from selling that gold has increased,” said Martin Pradier, a Veritas Investment Research analyst. “So of course they should be hitting all time highs.”
Despite the recent run-up, a gauge of gold miners still trades at a discount to the broader market, at less than 21 times future earnings, while the S&P 500 trades closer to 27. And the companies appear to be keeping their spending under control.
“In past gold rallies of 2010, 2011, for example, they kind of blew out their budgets and were penalized by the market for that,” VanEck Product Manager Andrew Musgraves said in an interview. “But they’re doing a very good job of maintaining their costs these days and then that’s translating to strong earnings.”
Big winners
Newmont earnings grew over 100% in 2024 after two years of declines and are expected to increase by over 50% this year, according to analyst estimates. The Denver-based miner’s shares have more than doubled this year, trading at the highest in more than three years.
Veritas’ Pradier said Newmont is his top gold stock pick because of its turnaround and lower production costs. Agnico Eagle was another top pick due to its continued strong execution and its significant assets in Canada.
The Canadian miner also had a strong year, with US shares rising more than 90% to trade at an all-time high. Agnico Eagle is expected to post large earnings gains while its gold production is forecast to fall.
Even Barrick, which logged a $1 billion net charge in the second quarter over troubles in Mali, has still climbed 80% this year in US trading as gold prices rally.
Stolen thunder
Gold stocks have also been driving some of the strength in broader markets. The broader Canadian market has outperformed US stocks this year, with eight of the 10 best performing stocks on the S&P/TSX Composite Index coming from the gold sector. The materials sector, which includes the miners, is the best performer with returns of over 55%.
The VanEck Gold Miners ETF has been particularly popular with institutions looking for temporary exposure to gold and secondary market liquidity, according to National Bank Financial analyst Tiffany Zhang.
Still, even with gold miners near all-time highs, the ETF is on track for its third year of outflows as investors embrace newer themes.
“Their thunder is stolen a little bit by those more AI-related things and also crypto-related things that people look for more this year,” Zhang said of the ETF and gold miner stocks.
While analysts aren’t expecting gold prices to decline just yet, they are facing the same uncertainty that have led them to rise.
“It is hard to look at 75% returns and three years of generally encouraging returns and say ‘can they keep going higher?’” VanEck’s Musgraves said. The outlook for gold is “subject to change on a daily basis based on how the administration reacts to certain tariffs and trade.”
(By Monique Mulima)