In recent years, gold has once again become the preferred safe-haven investment against a backdrop of inflation, geopolitical turmoil, and declining confidence in traditional fiat currencies. Since the pandemic, the price of gold has surged from lows of around $1,600 per ounce to nearly $3,500 per ounce. Despite this, gold stocks have not rallied in tandem, a phenomenon that has drawn widespread attention in the capital markets.
According to Tom Winmill, portfolio manager at Midas Funds, prior to mid-2024, most gold producers faced structural challenges. Rising energy and essential material costs pushed the average all-in sustaining costs in gold mining from $950 to $1,300 per ounce. In addition, supply chain disruptions, equipment shipping delays, and labor shortages at mining sites led to production costs far outpacing the rise in gold prices, significantly squeezing producers’ profitability.
Winmill further noted that, for commodities, producers are price takers—they cannot add extra value to each ounce of gold. It is precisely this cost pressure that has prevented gold stocks from fully reflecting the benefits of surging gold prices over the long term.
Sustained large-scale gold purchases by central banks—especially China—have provided powerful support for gold prices to reach record highs. U.S. financial sanctions against Russia, alongside investors’ concerns about political risks, currency devaluation, and ever-expanding fiscal deficits, have further boosted gold demand. Winmill emphasized that, as three thousand years of history have shown, there will always be a stable buyer for gold, greatly bolstering market confidence.
With the price of gold climbing, profit margins for producers are expanding as well, making gold stocks increasingly attractive. Winmill remarked, “In my 25 years of managing gold funds, I have never seen such generous profit margins. When production costs stabilize between $1,600 and $1,800 per ounce and gold prices rise above $3,400, almost all the difference becomes pure profit.”
Winmill pointed out that investors should pay special attention to the following factors when selecting gold stocks:
Winmill also suggested that, in addition to directly investing in gold stocks, investors can benefit from diversified allocation through gold funds. Mutual funds typically hold multiple stocks, helping investors mitigate individual stock risks through diversified portfolios. Professional fund managers, backed by long-term market research and project analysis, can promptly seize investment opportunities brought about by rising gold prices and provide continued value growth for investors.
