Mining stocks are stepping out of gold’s shadow.
After years of lagging the metal they mine, gold miners are starting to outperform. The GDX Index — a benchmark index for the sector — is up roughly 28% this year, compared to a 19% gain for gold itself.
The shift comes as gold spot prices hit a record $3,142 per ounce, setting the stage for earnings upgrades and a shift in sentiment. “Gold miners offer operational leverage to gold price upside, potential growth and dividend yields,” wrote UBS analyst Daniel Major in a recent note to clients.
Still, miners’ leverage hasn’t kept them from consistently underperforming gold over the past decade — a period in which gold nearly tripled.
In fact, over the past five years, the GDX has trailed gold by roughly 40%, dragged down by poor execution, rising costs, and disappointing returns on mergers and acquisitions. Even so, Major believes the setup is starting to shift in favor of the miners.
“We continue to see attractive risk vs reward in the gold miners.”
Valuations are low, but expectations are lower
Despite the recent rally, gold stocks remain deeply discounted.
UBS estimates the sector is still trading around 30% below pre-Covid averages on a price-to-earnings basis. That disconnect, Major argues, is more about sentiment than fundamentals due to years of missed guidance.
“It is difficult to have conviction that the gold sector will hit its targets and restore investor confidence,” he said.
With gold holding above $3,140 and full-year results in, expectations for upward earnings revisions are rising. “This should provide positive consensus earnings momentum vs consensus multiples that are already materially below historical levels,” Major noted.
He adds, however, that investor expectations may be more grounded this time. Forecasts for 2025 no longer assume broad unit cost declines, and guidance from big miners, including Newmont and Barrick, has become more conservative.
Seasonality may also work in miners’ favor.
Historically, the period between full-year results and Q3 earnings coincides with positive revisions. According to Major, this window “has typically been a better time to own gold stocks,” before the usual round of guidance resets kicks in later in the year.
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