Rising gold prices push miners' profits higher, but industry stocks still lag behind the metal's gains
Gold prices exceeded US$3,000 per ounce on Friday, a milestone that mining executives believe could renew investor interest in the sector, according to Financial Post.
Stephen Stewart, chair of Toronto-based Ore Group, described the event as a “major psychological milestone,” adding that while gold may test this level multiple times, history indicates that a decisive breakthrough often leads to further gains.
Gold prices have been rising steadily for over a year, recovering from a dip below US$2,000 in 2023.
The increase—more than 38 percent in the past year—has been driven by central bank purchases and investors seeking stability amid market volatility.
Stewart predicted that established gold producers, known as “majors,” will benefit first, attracting investors, strengthening balance sheets, and enabling acquisitions.
Eventually, he said, junior miners—companies focused on exploration without revenue sources—would also see benefits.
Despite gold’s upward trend, mining equities have lagged.
The VanEck Gold Mining ETF, a US$13bn fund linked to gold and silver miners, has risen 42 percent in the past year, surpassing gold’s gains. The VanEck Junior Gold Miners ETF, a US$4.7bn fund tracking precious metal explorers, has climbed 50.5 percent.
Ammar Al-Joundi, CEO of Agnico Eagle Mines Ltd., noted a disconnect between gold’s appreciation and mining stock performance, stating that while gold prices have multiplied tenfold since 2000, most gold equities have not kept pace.
Al-Joundi attributed past challenges to poor capital management, pointing to the 2010-2012 bull run, when gold exceeded US$2,000 per ounce before falling back to US$1,200-US$1,400 until 2019.
He noted that gold briefly surpassed US$2,000 in 2020 during the COVID-19 pandemic but only held above that level after Russia’s invasion of Ukraine, which led to Western sanctions freezing Russian assets.
Analysts attribute the current gold rally to central bank purchases, particularly by the People’s Bank of China.
In 2022 and 2023, central banks bought 1,082 tonnes and 1,037 tonnes of gold, respectively—more than double the 2012-2021 annual average of 492 tonnes.
Geopolitical tensions and market volatility have further supported gold prices. Since early February, the S&P 500 has fallen 7.5 percent, while the Nasdaq Composite has declined 10.2 percent.
Al-Joundi linked gold’s gains to investors seeking protection from economic uncertainty, stating that gold’s dual role as a monetary and hard asset positions it to rise as governments expand deficits and print more money.
Eric Sprott, a Canadian billionaire investor in gold exploration, predicted that gold could reach US$8,000 per ounce due to US fiscal policies.
He noted that while strong equity markets have kept some investors from gold, the metal's recent gains mark a “whole new era” where its role as a safe haven is being re-evaluated.
However, he added that mining equities remain undervalued, with market capitalizations not fully reflecting the potential value of their gold deposits.
Gold prices fell after reaching the recent milestone and have not returned to US$3,000 since. As of Sunday night, prices declined to almost US$2,980.
