FREE Shipping on $10k+ orders - $25 below $10k†

1-888-GOLD-160(465-3160)
SchiffGold Logo
View Cart ⸱
0
Post image
April 25, 2025・Key Gold Headlines

Gaining From Yesterday’s Gold Surges With Miners

When gold mining stocks lag behind gold price increases, you can front-run the next leg up in gold by buying them. And with gold rocketing toward $3,500, miners are still a discount buy. When gold mining stocks underperform relative to gold prices, they’re a potential opportunity for those who feel they’ve missed the boat on gold’s recent price surges. 

Investors who didn’t buy in earlier to this epic bull market for gold might feel like they’ve missed the rally. But here’s the good news: you don’t need to chase the gold price directly to benefit from its rise. Gold mining stocks offer a leveraged play on gold’s price movements, and when they lag behind gold, they often present a unique chance to get in at a discount.

Gold vs USD, 1-Month

If gold prices are rising, shouldn’t the companies that mine the metal benefit directly? In theory, yes—but the market doesn’t always work so efficiently. Several factors contribute to this lag.

One reason is investor sentiment. When gold prices surge, many investors rush to buy physical gold or gold ETFs, seeking the safety and simplicity of the metal itself. Gold mining stocks, on the other hand, are equities, and they come with additional risks. Mining companies face operational challenges—labor disputes, regulatory hurdles, geopolitical instability in mining regions, and rising production costs—that can weigh on their stock prices even as gold rises. 

During a gold rally, investors often prioritize the metal over the miners, leading to a temporary disconnect. They’re also subject to market overreactions, such as missed earnings expectations, which hold them down by short-term movements driven more by emotion than logic or longer term fundamentals. Similarly, investors overreact to temporary moves downward in the gold price, rushing to sell their mining stocks. But once gold rises again, those mining stocks often follow.

Another factor is the broader equity market. Gold mining stocks are influenced not just by gold prices but also by the overall stock market. If the S&P 500 or other major indices are underperforming due to economic concerns, gold mining stocks can get dragged down along with them, even if gold itself is soaring. This creates a situation where the stocks are undervalued relative to the commodity they produce.

Rising gold prices don’t always translate immediately into higher profits for miners. If a mining company’s production costs—such as energy, labor, or equipment—are also rising, their margins might not expand as much as investors expect. This can lead to skepticism about the miners’ ability to capitalize on higher gold prices, causing their stocks to lag.

But when gold mining stocks lag behind gold prices, they often become undervalued relative to the metal. This creates a chance for investors to buy into the gold mining sector at a discount, positioning themselves for outsized gains when the market eventually corrects the disparity. Just look at 2000-2011, when gold surged by 500% and winning miners, once they caught up, surpassed those gains with a 700% increase.

Gold mining stocks are inherently leveraged to the price of gold. If the price of gold rises by 10%, a well-run mining company might see its profits increase by even more, depending on its cost structure. This leverage works because miners’ revenues are directly tied to the price of gold, while many of their costs are fixed. When gold prices rise, the additional revenue drops straight to the bottom line, amplifying profitability. But this leverage works both ways—if gold prices fall, miners’ profits can shrink faster than the gold price itself. That’s why mining stocks are riskier than gold, but also why they offer greater potential rewards. When gold rises, miners will follow.

NYSE GDM Index, 1-Year

When gold mining stocks lag behind gold, their valuations often fail to reflect this leverage. For example, if gold rises by 20% but the average gold mining stock only rises by 5%, the stocks are likely trading at a discount to their real value. This is where metrics like the gold-to-miner ratio come into play. One way to measure this disparity is by looking at indices like the NYSE Arca Gold Miners Index (GDM) relative to the price of gold. If the ratio of gold prices to the GDM is at historic highs, it suggests that miners are undervalued compared to gold—a classic buy signal. 

For investors who feel they’ve missed gold’s recent surge, lagging mining stocks potentially offer a way to get exposure to the metal’s upward trajectory without paying the full sticker price. Let’s say gold has rallied from $2,000 to $2,500 an ounce over the past year—a 25% increase. You might hesitate to buy gold at $2,500, fearing a pullback. But if gold mining stocks have only risen by 10% over the same period, they’re effectively priced as if gold were still at $2,200 an ounce. By buying the miners, you’re getting exposure to gold at a discounted price when the mining equities finally catch up.

This strategy has worked well in the past. During the gold bull market of the early 2000s, there were several periods when mining stocks lagged behind gold prices, only to later outperform dramatically as the market corrected the imbalance. For example, between 2001 and 2003, gold rose steadily, but many mining stocks underperformed due to concerns about rising costs and geopolitical risks. Investors who bought during that lag were handsomely rewarded as the stocks caught up, often doubling or tripling in value over the next few years. At well-managed miners, the rise in gold price will eventually translate into much higher profits.

The case for gold—and by extension, gold mining stocks—remains as strong as ever. The U.S. dollar is on a long-term decline, eroded by years of reckless monetary policy and unsustainable government debt. Central banks around the world are buying gold at a record pace, and investors are waking up to the reality that fiat currencies are losing their purchasing power. Gold’s rise isn’t a fluke—it’s a symptom of a broader shift in the global financial system.

When gold mining stocks lag behind gold prices, it’s a temporary market inefficiency that smart investors can exploit. By buying undervalued miners, you’re not just betting on gold’s continued rise—you’re betting on the market’s eventual recognition of the miners’ true value. For those who feel they’ve missed gold’s surge, this is a chance to get in on the action at a discount, with the potential for outsized returns.

That said, not all mining stocks are equal. Put picking winners can yield significant returns, given that your investments are well-capitalized and well-run miners with solid fundamentals. Gold mining stocks can be more volatile than gold itself, and they come with unique risks. But they have a place in any diversified precious metals portfolio for many reasons including times like this month, when the lag in mining stocks presented a golden opportunity to gain from an ongoing bull market in the metal itself.

https://x.com/PeterSchiff/status/1912991467926069249

Miners incredibly cheap relative to gold’s rise

https://x.com/PeterSchiff/status/1914316426917077393 

Gold miners up: https://www.mining.com/surging-gold-stocks-lift-minings-top-50-companies-above-tariff-chaos/

 

Receive SchiffGold’s key news stories in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!
discountgoldleverageminersopportunitystocks