Gold miners glisten – is the shine here to stay?

Key takeaways

1. Falling confidence in the US economy has led to a weaker dollar. This has been positive for gold given the inverse relationship between the two and its reinforced use case as a safe haven

2. Central bank purchases remain at a heightened level, providing demand-side support

3. The rise in the gold price has resulted in higher earnings for miners, since they can increase their margins

In early September, gold passed $3,500 per troy ounce for the first time.[1] This latest surge, which brings year-to-date appreciation to 39%, came amid rising expectations of lower US interest rates and a weaker dollar, combined with general economic uncertainty.

For investors, there are two obvious questions: what’s the outlook from here, and if there are grounds to believe gold has further to rally, what are the options for gaining exposure?

The outlook: inverse relationship with the US dollar is supportive for gold

Lower US real rates have historically been supportive of the price of gold, since lower rates reduce the opportunity cost of holding gold.

Although in recent years other factors have dominated changes in the gold price, the upcoming US Federal Reserve interest rate decision on 17 September will nonetheless have significance for the direction of gold. Markets are currently pricing in an 113% likelihood of a rate cut at the meeting.[2]

The value of the US dollar has been adversely affected by diminishing confidence in the US economy, thereby reinforcing the perception of gold as a reliable safe haven.

If rate cuts further contribute to the trend of a weaker US dollar, this could be supportive of gold given the inverse relationship between the two, illustrated below.

Demand: central banks remain large buyers

As we’ve highlighted previously, consistent demand from central banks has provided structural support for gold over the past few years.

Global central bank purchases accelerated following the Russia/Ukraine war, as banks looked to dedollarise. In 2024, gold overtook the euro to become the second-biggest central bank reserve asset after the dollar, accounting for around 20% of global reserves.[3]

Total central bank demand in Q125 was 248.6 tonnes, and 166.5 tonnes in Q225. Although this represents a decline from 313.1 tonnes and 211.5 tonnes in the same quarters of 2024, it remains comfortably above the average since 2010 of c. 150 tonnes per quarter.

Exposure: metal or miners?

We believe there is a strong strategic case for a long-term allocation to gold as part of a diversified[4] portfolio. Given the significant appreciation of gold recently, however, some investors may also choose to make a tactical allocation to enhance exposure.

Investing in the metal itself is one intuitive way of accessing potential price appreciation. However, it does come with some drawbacks: logistical considerations mean direct ownership may not be practical, and gold has no yield.

Another option is to gain exposure indirectly through gold mining stocks. Historically, gold miners have demonstrated the ability to amplify changes in the price of gold due to their operational linkages. This tendency has been very evident in the year to date, with the spot gold price rising approximately 39% and global gold miners delivering a gain of around 104%.[5] Gold mining equities also have the benefit of providing income in the form of dividends.

Case studies: gold miners in focus

For investors who choose to access changes in the gold price via gold mining equities, it might be worth seeing how some of the world’s biggest gold miners are faring during this strong period for the metal.[6]

In the latest earnings season gold miners have reported solid sales and earnings growth. On average, sales grew by 44% year on year and earnings by 86% year on year, on the back of high gold prices. Below are three spotlights on some of the largest and purest gold producers globally.

Newmont*

• Revenue growth: 21% (+10% versus expectations)
• Earnings growth: 99% (+27% versus expectations)
• Performance summary: Delivered strong operational performance in Q2, attributable to gold production, and on track to achieve 2025 guidance

Agnico Eagle Mines*

• Revenue growth: 36% (+4% versus expectations)
• Earnings growth: 81% (+11% versus expectations)
• Performance summary: Delivered strong operational performance with record financial results, and continued to pay dividends and renewed its buyback programme

Anglogold Ashanti*

• Revenue growth: 77% (+6% versus expectations)
• Earnings growth: 109% (-2% versus expectations)
• Performance summary: Due to increased liquidity and size, it was added to the Russell 3000 Index in June

It’s important to note that gold mining stocks can entail significant company-specific risk. As such, it may be prudent to access the sector via a rules-based strategy that provides exposure to many different gold miners, reducing idiosyncratic risk while still providing a way of accessing the industry.

With the macro backdrop remaining supportive for continued gold price appreciation and earnings results demonstrating the knock-on effect of a higher price on mining stocks, we believe there’s a clear case for gold miners.

*For illustrative purposes only. Reference to a particular security is on a historic basis and does not mean that the security is currently held or will be held within an L&G portfolio. The above information does not constitute a recommendation to buy or sell any security.

 
[1] Source: Bloomberg as at 8 September 2025.
[2] Source: Bloomberg as at 8 September 2025. Greater than 100% chance means markets are pricing some probability of a larger cut.
[3] Source: https://www.ft.com/content/0d175cad-db7c-4dc2-83a8-90736f96f198
[4] It should be noted that diversification is no guarantee against a loss in a declining market.
[5] Source: LSEG as of 8 September 2025.
[6] Refers to Q2 earnings results. Sources: L&G, Bloomberg, company presentations, data as at 8 September 2025.