Gold Stocks: An Underappreciated Opportunity Amid Rising Prices
Gold’s Meteoric Rise
The price of gold has reached extraordinary heights in 2025, achieving its eighth record high of the year recently, though it experienced a minor pullback by day’s end. To put the current trend into perspective, gold futures have appreciated by an impressive 11% thus far in 2025, trailing a staggering 27% rise in 2024, marking the most significant single-year increase on record.
What’s compelling about this gold rush is the driving force behind it. Unlike past booms primarily fueled by U.S.-centered concerns such as inflation and geopolitical uncertainty, today’s rally is largely international. Notably, central banks across the globe are strategically diversifying their reserves away from the dollar, especially following the sanctions that immobilized Russia’s central bank assets in response to its actions in Ukraine. Countries like China, Turkey, Russia, and Poland have ramped up their gold purchases, with China even enabling its insurance firms to increase gold investment allocations.
Growing Investment Demand on a Global Scale
Global investment in gold surged by 25% in 2024 according to the World Gold Council, driven by pronounced inflows into gold-backed exchange-traded funds (ETFs) during the latter half of the year. Specific markets such as India and China have shown robust demand for physical gold, which has more than compensated for decreasing interest in the U.S. and Europe.
Gold Miners: An Underperforming Asset Class
Despite these favorable market conditions for gold itself, gold mining stocks have lagged. The VanEck Gold Miners ETF (GDX), which includes heavyweights like Newmont and Barrick Gold, achieved merely a 10% return in 2023 and an even more modest 10.6% in 2024, while the SPDR Gold Shares ETF (GLD), which directly tracks the price of physical gold, performed better with returns of 12.7% and 26.7% respectively.
However, the narrative shifted in 2025, where the Gold Miners ETF logged a compelling 24% return against the GLD’s 11%. Yet, analysts believe that there remains substantial upside potential for these miners, considering that historically, rising gold prices should coincide with even sharper increases in mining stocks due to enhanced profit margins amid relatively stable production costs.
Analysts’ Bullish Sentiment
Analysts have significantly ramped up their earnings forecasts for gold mining companies in the VanEck ETF, with a staggering 77% increase anticipated over the past two years, as highlighted by FactSet. This divergence suggests that mining stocks have not adjusted in tandem with expectations for profit, establishing a ripe environment for what could be considered a catch-up trade in gold equities.
If the current mining stocks were to align with their earnings potential, the VanEck ETF could approximate a valuation of around $51 per share—an increase of roughly 23% from the latest figure of $41.47. According to Bhawana Chhabra, a senior market strategist at Rosenberg Research, gold miners present a “significantly underappreciated equity opportunity” with “strong fundamentals” and “comfortable valuations,” making them an attractive risk-reward prospect in today’s market.
The Valuation Gap: A Buying Opportunity
Current pricing metrics further substantiate this potential. The VanEck ETF is trading at just over 12 times its 12-month forward earnings, yielding a sharp 44% discount compared to the S&P 500’s 22 times. Notably, this valuation divergence is much wider than its ten-year average of 20 times, which suggests room for improvement. Narrowing the price-to-earnings ratio to that historical norm would push the ETF valuation to just above 16 times, propelling it again to the anticipated $51 mark.
For investors eyeing gold stocks, the critical factor now hinges on market confidence in sustained or increasing gold prices—currently edging toward the $3,000 per ounce milestone. As momentum builds in gold mining equities, there is a strong likelihood that investors will incrementally accept higher multiples for these stocks.
Conclusion: Time for Gold Miners to Shine
In summary, while gold prices have soared, the lagging performance of gold mining stocks offers a compelling opportunity for discerning investors. The convergence of strong global demand, rising central bank purchases, and optimistic profit forecasts present a favorable backdrop for the mining sector. With valuations at a discount and signs pointing toward a price recovery, now may indeed be the time for gold-mining stocks to take center stage.
Investors should keep a close watch on this sector, as the calculated catch-up trade in gold mining equities could prove enormously rewarding.
