Over the past year, the mining sector has been incredibly hot, driving the TSX index to significantly outperform the S&P 500. There is no doubt that if materials stocks can maintain their strong momentum, the Canadian stock market might usher in another bumper year.
Despite the generally strong performance of commodity miners, the main momentum is still concentrated in the precious metals sector. Unsurprisingly, gold and silver mining stocks have soared in popularity, even surpassing some AI-themed stocks. From any perspective, as we move into 2026, gold and silver trading are the focal points of market attention.
However, considering the potential risk of the market overheating, whether it is too risky to enter at current levels remains a core question. Undoubtedly, whenever commodity prices experience such a sharp rise, investors should fully recognize the downside risks. Although the “currency devaluation trade” and macro factors continue to support gold prices, one cannot help but ask: to what extent have these positive factors already been priced in by the market?
The precious metals sector has accumulated astonishing gains, and the tailwinds supporting price increases have been well known to the market for several quarters. Although geopolitical tensions and a potential pullback in AI-themed stocks (software stocks led the decline during Thursday’s trading session) could further drive up the stock prices of gold, silver, and other metal miners, after such a fiery rally, investors might be better off waiting for a market adjustment opportunity. While bullish on gold in the long term, it must be acknowledged that the market has just experienced a historic surge, and capital is pouring in from all sides.
Momentum trading can bring substantial returns but also carries considerable risks. For investors hoping to participate, mining stocks may be the best choice. Currently, the valuation multiples of first-tier mining stocks have not fully kept pace with the soaring prices of gold and silver. In terms of relative value, mining stocks hold an advantage over physical ETFs or gold bars.
Barrick Mining (TSX:ABX) saw its stock price surge significantly in 2025, but even amid such a strong rally, the stock could experience a pullback—as evidenced by its decline of just over 2% on Thursday. Of course, compared to the gains over the past year, this fluctuation is insignificant. Considering that gold prices may remain elevated in the long term, any pullback could present a buying opportunity.
Although a trailing price-to-earnings ratio of 24.8 times appears slightly expensive, if gold prices continue to strengthen, the company’s earnings could experience substantial growth. If a spin-off could unlock more value and other metals (such as by-products of gold production) rise simultaneously, then Barrick Mining stock at the current $70 per share might still be severely undervalued. Barrick Mining stands as the value pick in the gold mining sector, offering more considerable growth potential compared to higher-priced peers.
Additionally, the 1.3% dividend yield can be seen as an extra bonus. If gold prices maintain their strength, the company is likely to significantly increase its dividend as cash flow surges due to unprecedented price increases in metals such as gold, silver, and copper.
