In the Spotlight Trend of the Month
Gold is having a phenomenal run at the moment, continually hitting new all-time highs.
Year to date, the precious metal is up more than 45%, meaning that it has outperformed the S&P 500 Index, the Nasdaq, Bitcoin, and every single Magnificent 7 stock in 2025. Here, we’ll look at what’s driving these incredible gains. We’ll also look at how the strength in gold is also pushing gold mining stocks up at a breathtaking rate.
A safe-haven asset
Gold is a classic “safe-haven” asset, meaning that it typically sees high demand whenever there is heightened economic or political uncertainty. And right now, there is certainly a lot of this. For a start, soaring levels of government debt cloud the long-term economic landscape. In the US, national debt currently stands at around $37 trillion (about 1.3 times 2024 US GDP), and some economists are concerned that if this debt pile keeps growing, investors could lose confidence in the government's ability to pay, leading to a rapid sell-off of US bonds and a full-blown financial crisis.
There’s also uncertainty on the political front. With Donald Trump in the White House, policy surprises are never far away. One specific issue that has many investors worried is US Federal Reserve independence. If this is compromised, it could lead to unpredictable monetary policy, a loss of market confidence, higher inflation expectations, and potentially a weaker US dollar. Note that analysts at Goldman Sachs have said that if Fed independence appears to be compromised, gold could potentially rise to $5,000 per ounce in 2026.
In addition, the geopolitical backdrop remains highly uncertain. In Europe, the war between Russia and Ukraine – which began in early 2022 – rumbles on. Meanwhile, in the Middle East, conflict constantly threatens to escalate. Overall, it’s a volatile geopolitical environment and there are plenty of risks in relation to global supply chains and commodity prices.
Influenced by interest rates and inflation
Looking beyond all the uncertainty, interest rates and inflation are also playing a key role in gold’s price action right now. When rates fall and the yields available on savings accounts and fixed-income securities drop, gold tends to become more attractive to investors as the opportunity cost of holding the commodity – which pays no interest or coupons – is lower. Note that in August, the Fed cut interest rates by 0.25%. It also signalled that there are likely to be more rate cuts ahead.
Turning to inflation, it remains sticky. In the US, for example, it is near 3% and many experts believe that Donald Trump’s tariffs could push it higher. This is leading to inflows into gold as the commodity is typically seen as a hedge against inflation. One reason for this is that the supply of gold is limited and therefore the commodity is viewed as a store of value.
Strong central bank demand
On top of all this, central banks continue to buy gold to boost their reserves. For these organisations, the commodity represents a way of diversifying away from the US dollar and hedge risks. Recently, buying gold has been particularly strong from China – it’s looking to reduce its exposure to US Treasury bonds and strengthen the credibility of its own currency. Poland is another country that has been stockpiling the precious metal – its reserves are now larger than those of the European Central Bank (ECB), according to the head of the Polish central bank.
Gold mining stocks are significantly outperforming gold in 2025
While gold has performed really well this year, its gain actually pales in comparison to the returns generated by some gold mining stocks. Year to date, some of these stocks are up 100%, 200%, or more.
The reason for this is that gold mining stocks tend to be leveraged plays on gold. With miners usually having relatively fixed operational costs, even a small increase in the price of gold can lead to a sharp increase in profitability and a significantly higher share price. However, this leverage also amplifies losses when gold prices fall.
Here’s an example. Let’s say that it costs a gold mining company $2,000 to produce an ounce of gold. If the market price of gold is $3,500, its profit is going to be $1,500 per ounce. However, if gold rises 10% to $3,850, its profit is suddenly $1,850 per ounce, or 23% higher. So, the company’s increase in profitability has dramatically outpaced the move in gold. (The example above is hypothetical and provided for illustrative purposes only. It does not account for transaction costs, taxes, or management fees.)
It’s worth noting that many of the world’s gold mining companies were built to be profitable at gold prices far below today’s levels. As a result, many companies have “all-in-sustaining costs”’ (AISC) of below $2,000 per ounce. Some examples of companies with low operating costs include Kinross Gold, AngloGold Ashanti, and Agnico Eagle Mines. For these kinds of companies, current gold prices are leading to substantial revenues and enormous profits.
Those looking for portfolio exposure to gold and/or gold mining stocks may wish to check out eToro’s GoldWorldWide Smart Portfolio. Designed to offer broad exposure to the gold industry, this provides investors with access to a range of gold miners as well as some gold ETFs.
