Investors Capitulate On Gold Mining Stocks
With the turning of the calendar year, I have rarely witnessed sentiment on the gold sector as negative as it is today
We begin 2025 with gold bull Goldman Sachs downgrading its gold price trajectory:
The global investment bank sees gold’s appreciation to $3,000/oz being delayed by a more hawkish posture from the Federal Reserve. However, global central bank buying will continue to power the yellow metal to new heights over the next couple years.
Gold (Weekly)
Meanwhile, gold mining investor sentiment continues to plumb the lows. Just in the last few days I’ve noticed a consensus forming that mining stocks are uninvestible. Even long time mining stock investors have recently expressed to me that they have given up on the sector.
A selection of comments and messages I have received in recent days:
“So dead, so dead”
“…until the SPY breaks and go into bear market & gold beats out the 60/40 portfolio, these mining stock will drown a slow death.”
“I don’t think the sector will ever recover.”
“You have to have something wrong with your brain to own a mining stock.”
While I can certainly sympathize with investor frustration, I think it’s important to highlight some realities.
The gold mining sector is not intended to be invested in as a sector. As Rick Rule likes to say “Don’t own the sector, cherry pick the sector. I repeat, don’t own the sector, cherry pick the sector.”
By owning and holding the GDX or GDXJ over long periods of time you are choosing to own beta. Mediocre beta at best.
We all know the challenges the mining sector faces, from jurisdictional risk to a shrinking talent pool. Why then would an investor want to own a large basket of stocks filled with these risks and operational complexities?
Yes, there will be periods of time in which an ETF such as the GDXJ will serve as a nice swing trading vehicle to capture 2x or 3x the performance of gold during a strong rally. However, these are trading vehicles. They serve their purpose, nothing more and nothing less.
If an investor wants to be lazy and just own an ETF, then they shouldn’t expect to generate alpha in their portfolio. Alpha requires stock picking and identifying special situations in which companies can far outperform their sector.
Here is a selection of gold mining stocks that vastly outperformed in 2024:
IAG (Daily)
IAMGOLD (NYSE:IAG) +125%
CDE (Daily)
Coeur Mining (NYSE:CDE) +110%
KGC (Daily)
Kinross Gold (NYSE:KGC) +70%
FDR.V (Daily)
Founders Metals (TSX-V:FDR) +190%
SKE.TO (Daily)
Skeena Resources (TSX:SKE) +100%
And the best part is that there are literally dozens of other gold stocks that generated stellar returns in 2024.
Meanwhile, investors have given up.
While I acknowledge the challenges of extractive industries in 2025, I also see tremendous opportunity. The thinning of investor ranks in the mining sector means there are greater opportunities for those who are paying attention.
Stock picking never went away. In fact, in the mining sector stock picking is more important than ever.
Don’t own the sector, cherry pick the sector.
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