By Ian Salisbury
Gold miners' stocks have had a great run. But investors who embrace this risky way to bet on the price of gold might get burned.
It's been a great year for gold, with the precious metal's price gaining more than 60% -- thanks to geopolitical uncertainty, a weakening dollar, and global central banks' purchases.
Still, gold mining shares have done even better. The VanEck Gold Miners exchange-traded fund is up 150% in 2025, thanks to torrid gains by stocks like Newmont Corp. (up 170%) and Barrick Mining Corp. (up 160%.)
In some ways the outperformance makes a lot of sense. Gold miners are often regarded as leveraged, or magnified, bets on the price of gold itself.
That's because gold mining costs are largely fixed. When the price of gold is equal to or just above the price to get it out of the ground, these companies tend to be barely profitable. But when gold prices exceed mining costs, profits grow quickly. Every extra dollar they earn from inflated gold prices becomes pure profit. The math means a small percentage gain in gold's prices becomes a big percentage gain in these companies' earnings.
Unfortunately, the dynamic works in reverse, too. While gold miner stocks have outdistanced gold during the first 50 weeks of the year, they were hit hard when gold hit a rough patch this fall.
In October, as investors worried the Federal Reserve could pause interest-rate cuts, gold prices began to slump. The long gold bull market appeared like it could be near its terminus. In the end, gold prices fell 9.4% between Oct. 16 and Nov. 5, before recovering and heading back toward their mid-October high.
During that span, the VanEck Gold Miners ETF fell nearly 20%, before finally getting its footing.
Sooner or later, that kind of selloff is likely to happen again.
Indeed, history shows that, while gold miners do sometimes dramatically outpace gold, the pattern typically reverses before long. In a note Tuesday, researcher DataTrek compared 100-day trailing returns for both gold and gold miners going back to 2010.
DataTrek found that, looking at any given 100-day period, miners underperformed gold only about 42% of the time. Miners' average 100-day returns lagged behind those of gold by 0.3 percentage points.
DataTrek did find five instances where gold miners seriously beat gold -- outperforming by 30 percentage points or more over the 100-day window -- including one instance earlier this year, that wrapped up around Sept. 15.
While gold miners could continue to shine in the near term, the odds aren't in their favor. In three out of the four historical instances DataTrek found, gold soon regained the lead.
"Our longstanding bullish view on the yellow metal still holds, and the miners may still outperform the S&P 500," wrote DataTrek co-founder Nicholas Colas. "But the case for the metal over the miners is a strong one here."
Write to Ian Salisbury at ian.salisbury@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
December 16, 2025 14:49 ET (19:49 GMT)
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