- Gold surges above $5,000 an ounce for the first time
- Gold mining stocks are finally starting to perform
- NYSE Arca Gold Bugs index is now 40% above its 2011 all-time high, but that prior peak came when gold stood at $1,857
“Gold is not everyone’s idea of a suitable portfolio investment – former Prime Minister and Chancellor of the Exchequer Gordon Brown once dismissed it as a ‘barbarous relic’ – but the precious metal continues to melt up to new all-time highs,” says AJ Bell investment director Russ Mould.
“Central bank purchases of gold are helping to drive the metal’s price higher, as are ongoing concerns over lofty government debts on both sides of the Atlantic, worries over the independence of the US Federal Reserve, the rising global geopolitical temperature and the potential for an inflationary crack-up boom in America as the Trump administration seeks lower interest rates on top of tax cuts for consumers.
“Gold itself has limited industrial uses and comes with a cost of ownership, in the form of storage, insurance and the absence of yield that could be accrued from cash, money market funds or bonds. Some portfolio builders will still fight shy of embracing the metal, especially when they can get returns from cash in the bank that currently exceed inflation.
“But gold is durable, has a history of being money since time immemorial and is difficult and expensive to produce, so it can be seen as a store of value at a time when inflation is eroding the purchasing power of money in the West. Supply of gold grows much more slowly than that of ‘money’ and it is just possible that the above-target-inflation seen since 2021 is part of the bill for the interest rate cuts and additional Quantitative Easing and money creation deployed by central banks to see the globe through the pandemic.
“Either way, the metal is melting up – and gold mining stocks are starting to get the message, albeit after what feels like an age. It took until November 2025 for the New York Stock Exchange Arca Gold Bugs index, or the HUI, to pass the all-time high it had set in September 2011, and that it set the peak when gold traded at $1,857 an ounce.
Source: LSEG Refinitiv data
“Miners’ share prices now seem to be buying into gold’s own advance to new highs with greater enthusiasm and conviction and the diggers are finally starting to provide premium returns relative to the precious metal itself.
Source: LSEG Refinitiv data
“Nevertheless, the Gold Bugs index still trades an awful lot nearer to its lows than its highs, on a price relative basis compared to the price of gold.
Source: LSEG Refinitiv data
“This may persuade some investors to think about gold miners more, especially as the successful ones do generate cash and do pay a dividend, thus offering a yield. Their earnings and cash flow, and thus potentially their dividends, are also highly geared to the gold price.
“However, a series of takeovers leaves London-listed options much thinner on the ground. Randgold Resources, Barrick Gold, Centamin, Hummingbird Resources and Shanta Gold have all fallen to predators. However, there is still one gold mining stock in the FTSE 100, Endeavour Mining, while Fresnillo produces gold even if silver is its main commodity and is boosting its gold reserves and output with the purchase of Canada’s Probe Gold for $560 million. Resolute Mining has a London listing, to accompany the one it has in Australia.
“The FTSE 250 is home to silver miner Hochschild, which also produces gold, and Pan African Resources. London’s junior market, AIM, also offers a selection of around twenty gold miners, of varying degrees of maturity, from mining licence-holders to prospectors to established producers.
“Not all gold miners are equal, and investors must patiently research them and apply six tests to see whether they may be suitable for portfolio inclusion or not.
- Whether a gold miner is already producing, in the exploration phase or is in the process of obtaining (and making the most of) a license.
- If it is in the production phase, the next task is to assess the size of its resource and the production profile of existing mines. There is little or no point buying a gold miner if it is about to exhaust its reserves and deplete its mine.
Source: Company accounts
- Where the company operates, and the risk (or otherwise) of difficulties with local governments over mining rights and taxes, as well as the susceptibility of individual mines to problems posed by difficult conditions, such as extreme weather. Snowstorms tripped up Alamos Gold’s Canadian operations in late 2025, while Mali has proved a difficult place in which to operate at the moment. Resolute Mining suffered the detention of some of its executives ahead of the resolution of a tax dispute and the subsequent resignation of its CEO, who had been one of those held by the local authorities. Barrick Mining shuttered its mines in the same country after the government seized gold stockpiles and detained staff, as the company and the country argued over the implementation of the West African nation’s 2023 mining code. Barrick eventually settled with a $438 million payment, but it took until December 2025 for operations to fully recommence at the Loulo-Gounkoto mining complex, in which Barrick has an 80% stake, while the government owns the other 20%.
- The company’s all-in sustaining cost (AISC) of producing an ounce of gold, as this will reveal how profitable (or otherwise) the firm will be relative to the prevailing metal price. Some miners publish a cash cost figure, but this may not include third-party smelting, refining, transport costs, local taxes and office running costs so it may not give the full picture. Key cost variables include staff and diesel and fuel, and they can be affected in turn by local currency movements in the countries where their mines are situated. One really big piece of good news for gold miners at the moment is the depressed price of oil, given how energy-intensive their operations are.
- The experience and skill set of the management team and executive board.
- The miner’s balance sheet and how much cash or debt it has. The more of the former and the less of the latter the better, especially if gold prices drop.
“Finally, having assessed the miner’s operations, investors must study the valuation currently attributed to its stock. This can be done using earnings- or yield-based metrics, but both can be deceptive, especially if the gold price starts to swing around a lot. A further option is to look at net asset, or book, value. This will not move around quite so much as profit forecasts, and it should grow over time, potentially quite quickly, at least if the gold price remains firm and profits start to pour out of the ground.
“The miners are now looking more expensive after their recent gallop and the multiples of book value that prevail now suggest AngloGold Ashanti may have got itself a bargain when it paid around 1.7 times book value for London-listed Centamin back in 2024.
“Intriguingly, for all of the flak that London continues to catch about how cheap it is compared to the US equity market, gold miners seem to trade on broadly similar multiples of net asset value, at least based on their last published, historic net asset value per share figures.”
Source: Company accounts, Marketscreener, analysts’ consensus forecasts
Source: Company accounts, Marketscreener, analysts’ consensus forecasts
