As Gold Rises, Gold Mining Stocks
Are Soaring

Gold is having a phenomenal run in 2025. Fueled by geopolitical uncertainty, concerns over government debt levels, and the prospect of lower interest rates in the US, the precious metal has risen around 40% year to date. That gain pales in comparison to the returns produced by some gold mining stocks in 2025, however. Because many of these stocks are up 100% or more this year thanks to the significant move higher in gold prices.

Gold Mining Stocks are Leveraged Plays on Gold

The reason that a lot of gold mining stocks are outperforming gold at present is quite simple. Put simply, these stocks are leveraged plays on the precious metal. When the price of gold is rising, gold producers’ revenues typically rise at a much faster rate than their costs (which are usually relatively fixed). This dynamic creates an element of operating leverage whereby even a small increase in the price of the commodity could lead to a material increase in profitability.

Here’s a simple example to illustrate this. Let’s say that it costs a gold miner $2,000 to produce an ounce of gold. When the price of gold is $3,000 per ounce, the company's profit is going to be $1,000 per ounce. If the gold price rises to $3,500, however, the company’s profit rises to $1,500 per ounce. So, a 16.7% increase in the price of the commodity has resulted in a 50% increase in profitability for the producer. This magnified effect on profitability is what drives gold mining stocks sharply higher during a bull run in gold.

Very Profitable Economics Today

It’s worth pointing out that many gold mining companies have built their business models around significantly lower gold prices. These miners were designed to be profitable when gold prices were below $2,000, so all-in sustaining costs (AISC) - which include expenses for labor, equipment, energy, and administration - are significantly below today’s gold price.

For example, AngloGold Ashanti (4.74%*), which has mines in nine countries including the US, Brazil, Australia, and Egypt and is aiming to produce 2.900Moz and 3.225Moz of gold in 2025, is expecting AISC of $1,580 to $1,705 per ounce for the year¹. Zooming in on Kinross Gold (4.66%*), which has mines in the US, Canada, Brazil, Chile, and Mauritania and is targeting approximately 2.0Moz of gold this year, it is expecting AISC of around $1,500².

For companies like this, current gold prices are a major boon. With all-in sustaining costs of around $1,500 to $1,700 per ounce, these companies are looking at substantial revenues and earnings while gold is trading near $3,700 per ounce. And the higher the price of gold goes, the greater their earnings could potentially be. With a high proportion of operational costs being fixed - as opposed to variable - a large chunk of any increase in revenue is likely to fall through to the bottom line. Note that as of September 24, these two gold stocks were up around 190% and 150% respectively in 2025. So, they have outperformed gold by a wide margin this year.

Other Drivers of Gold Mining Stocks

Beyond operational leverage, several other factors could contribute to the outperformance of gold mining stocks when the price of the precious metal is rising. One is improved financial health. When profit margins are elevated, miners are often able to pay down debt and strengthen their balance sheets. They may also initiate or increase dividend payments to shareholders. This may make them more attractive to a wider range of investors. Increased profits can also be reinvested to expand existing operations and increase production or allocated towards exploration activities to find new gold deposits. These activities potentially lead to future growth and help to boost a company's share price.

The Outlook for Gold

Looking ahead, there is no guarantee that the price of gold will continue to rise. However, the commodity is in a strong uptrend at present, and many experts expect it to make further gains in the medium term. Analysts at JP Morgan, for example, believe that gold could hit $4,250 by late 2026³. Analysts at Goldman Sachs, meanwhile, have said that the precious metal could potentially hit $5,000 in 2026 under certain scenarios⁴.

One factor that could boost gold prices in the medium term is lower interest rates. When rates come down, the opportunity cost of holding gold - which pays no interest - is lower. Another factor is concerns over US Federal Reserve independence. If independence looks to be compromised, gold could be a major beneficiary since investors often use the commodity as a hedge against currency debasement and inflation when faith in central bank policy or stability is shaken.

If gold does end up going higher, there’s a good chance that a basket of gold mining stocks could deliver outperformance. Because with their relatively fixed costs, miners’ profit margins should expand at a faster rate than the rise in the underlying gold price.

Footnotes:

¹AngloGoldAshanti, Year End 2924 Earnings Release, as of February 19, 2025

²Kinross Second Quarter Report, as of July 30, 2025

³J.P.Morgan, Will gold prices break $4,000/oz in 2026?, as of June 10, 2025

⁴Investopedia, Goldman Sachs Warns Gold May Reach $5,000 if Federal Reserve's Independence is Compromised, as of September 8, 2025