Gold Mining Stocks: Between Euphoria and Caution
Investors who pulled $669 million from the largest ETF tracking gold mining stocks last month appear to have been prescient following Tuesday's gold price plunge.
Sharp Decline in Mining Stocks
The VanEck Gold Miners ETF (GDX) plummeted 9.4%, its worst drop since March 2020, coinciding with the worst selloff in spot gold in over a decade. Shares of major miners like Newmont Corp., Agnico Eagle Mines Ltd., and Barrick Mining Corp. all fell about 9%. The declines erased more than a week's worth of gains for Newmont and Agnico, and over a month's worth for Barrick. The ETF continued to slide in premarket trading on Wednesday.
Early Warnings
This decline followed a series of warnings that gold's nearly 60% surge since 2025, breaking past $4,000 an ounce, was becoming unrealistic. However, the situation for gold mining companies was even more concerning, as their stocks had risen twice as much as gold itself this year.
Analyst Insights
"The gold sector's rally, particularly the large caps, may have been a bit overdone and too quick—especially considering that gold itself has only risen half as much as the miners," says Candice Bangsund, portfolio manager at Fiera Capital Corp.
Timing Risks and Market Expectations
That view is widely held, but attempting to time a pullback after a strong rally carries risks. Wall Street professionals often refer to "blow off tops" in bull markets, where the most intense surge occurs just before a sharp decline. It is too early to determine whether Tuesday marks the beginning of a long-term selloff in gold and mining stocks, or just a one-day blip.
Cautious Outlook
"I feel like I’m hanging on to the edge of a rocket right now, and I’m just hoping I can get off before it reverses course," says Jay Kaeppel, senior research analyst at Sentiment Trader. "I’ve seen this before, and it never lasts forever," he added in a phone interview.
Capital Flows and Market Volatility
The outflow of $668.6 million from the VanEck Gold Miners ETF in September, the largest outflow in five months, suggests that some investors were already questioning the sustainability of the rally. Nevertheless, the ETF is still up 115% this year, and Newmont, the largest U.S. miner, has surged 131%.
A Different Perspective
Nancy Tengler, chief investment officer and CEO of Laffer Tengler Investments, believes that these capital flows are justified.
"I’ve been bullish on gold for years, but what I’m seeing now keeps me up at night," she says. "Gold has become a ‘risk-free’ trade, and no one is questioning whether it’s topped out."
Future Projections
Bangsund expects gold and mining stock prices to stabilize in the coming months, especially if the Federal Reserve fails to deliver the two interest rate cuts that the market is expecting.
Increased Volatility
More worryingly, the precious metals market, which has historically favored stability and safe-haven characteristics, is starting to show volatility. This relatively calm market has become more turbulent. On Tuesday, the actual volatility of gold prices relative to the S&P 500 index rose to its highest level since 2020.
Looking Ahead
"As people take profits, the recent one-day volatility will be very extreme," says John Ciampaglia, CEO and managing director of Sprott Asset Management LP.
Ciampaglia adds that he remains bullish on gold mining stocks in the long term, unless this volatility and rapid price swings trigger a chain reaction of "selling leading to more selling." He anticipates that these mining companies will "make a killing this quarter" due to lower costs and record-high gold prices.
Upcoming Earnings Announcements
Newmont is scheduled to announce its third-quarter results on Thursday, Agnico Eagle Mines is set to disclose results next week, while Barrick will not report until November.
Bets on Upside
Derivatives traders are still betting on continued upside for gold and gold stocks. Mandy Xu, vice president of the Chicago Board Options Exchange and head of derivatives market intelligence, says that options trading volume in the SPDR Gold ETF hit a record last week, and most of the demand came from bullish investors "chasing gold higher through options instruments."
Caution Advised
Those bets now appear to be a bit hasty.
Kaeppel from Sentiment Trader expects that while gold mining stocks may continue to profit as gold prices rise, they remain speculative in nature, and a stronger dollar will trigger selloffs.
"Once the selling starts, I think a month or two of gains will evaporate in a matter of days, and then the market will decide what to do next," Kaeppel says.
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