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Gold Just Hit a Record High. Don’t Buy the Metal, Buy These Stocks Instead GDX

Updated: Mar 6



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As gold scales all-time highs, Wall Street analysts say it has even further to go


Gold is at a record high, propelled in recent weeks by a dip in bond yields and a weaker U.S. dollar, plus some elevated geopolitical risk. That’s finally bringing some relief to shares of gold miners and other gold-linked stocks. History suggests the rally has legs.

Gold was trading above $2,060 per ounce on Thursday, surpassing its $2,051.50 record high hit in August 2020. The price is up 13% in 2023, but the bulk of the gains have come in the past two months. Gold has gained 12% since trading around $1,830 per ounce in early October.

Since then, war has erupted in the Middle East and bond yields have reversed their relentless rise, as traders have priced in a lower Federal Reserve interest-rate target next year. Investors tend to flock to gold during periods of global turbulence, while lower yields make gold—which pays no interest or dividend—more attractive. Silver has also recently moved up after enduring a nearly eight-month downtrend.



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Shares of gold miners haven’t nearly kept pace with the price of the metal they produce, although the group is showing signs of life. The widely followed VanEck Gold Miners exchange-traded fund is now up almost 9% year to date, after a 16% surge since the start of October. Newmont stock is down 14% in 2023.

The scale of the divergence and related technical indicators argue for a continued catch-up rally by gold-mining stocks.

It has been quite a bifurcation: “For only the seventh time in more than five decades, gold futures closed higher than 91% of all other prices over the trailing three years as a gold mining index resided in the bottom half of its range with a reading of 36%, creating a massive divergence,” wrote a senior research analyst on Wednesday.

In the past, when the gold price was similarly at the upper end of its three-year range and miners were at the bottom end, the latter group was higher six months later every time, per data from. The NYSE Arca Gold BUGS index—which tracks gold-mining companies that don’t hedge their production, making their results more sensitive to gold-price changes—boasts a median return of 22.5% over such periods.


As for the gold price, subsequent returns historically haven’t been nearly as strong. Flight-to-safety trades don’t go on forever. And a decent chunk of the recent rally has come in expectation of a coming Fed pivot and decline in interest rates. Once that actually happens, it should be a sell-the-news event for gold. Investors are likely to shift to other non-yield-producing investments like growth stocks.

“Commodity-based assets, like gold mining stocks, often face challenges in sustaining long-term upward trends due to the mean-reverting nature of commodities,” Christians wrote. “This characteristic makes adopting a buy-and-hold strategy challenging. Nonetheless, during cyclical upswings, returns can be spectacular over a short period.”

The divergence between the gold price and miners’ stocks this year—paired with the latter group’s recent momentum—suggest that one of those periodic upswings is here. But remember: Don’t marry the gold-miner trade, just date it.



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