There is no gold bull market without participation of gold miners.
Admittedly, gold miners have been lagging, tremendously in fact. But that’s changing ‘as we speak’ because gold miners are now staging epic secular breakouts.
In this article, we repeat the fundamental drivers underpinning this gold bull market. We also look at gold miners which are coming to life and will amplify the gold bull market.
Dominant Gold Price Drivers
Rising inflation expectations
Inflation expectations have proven to be a dominant market dynamic driving gold prices higher in this new gold bull market.
As inflation is stabilizing, globally, inflation expectations are on a steady path higher. Investors are increasingly turning to gold as a hedge against normalizing inflation.
Essentially, what happened in 2022 is that aggressive disinflationary policies introduced by policy makers pushed the real inflation rate lower. This, in turn, affected the gold price.
Historical data reveals that gold performs exceptionally well when inflation expectations are on the rise. This trend is particularly relevant today, as inflationary pressures are pushing gold to new levels.
As we approach 2025, the rise in inflation expectations is expected to maintain momentum. This trend highlights the strength of gold as an investment asset, emphasizing its role as a key asset for smart and diversified investors.
Central bank purchasing: A supportive yet secondary dynamic
While central bank purchases of gold have certainly contributed to the bullish trend, they are secondary to the primary driver of rising inflation expectations. Recent data from July 2024 shows an increase in central bank gold purchases, providing a supportive backdrop for gold prices.
Central bank buying is an important component of the overall gold market dynamics, complementing the primary driver of rising inflation expectations.
Gold Miners: From Lagging to Leading
Gold mining stocks have faced a challenging period over the past 18 months, lagging significantly behind bullion prices. The recent turnaround in gold mining stocks is attributed to the decline in crude oil prices and the surge in bullion prices, creating a potential breakout for gold miners.
The breakout in gold mining stocks is occurring on a secular timeframe, indicating a significant shift in the long-term trend. This development, while largely unnoticed by mainstream financial media, presents a pivotal moment for the gold mining sector.
Gold Miners’ secular breakouts happening now
The HUI Gold Bug Index, a benchmark for gold mining stocks, is experiencing a bullish breakout, signaling a potential significant recovery. Ratio charts like the HUI/Dow ratio also indicate relative strength in gold miners, suggesting a promising outlook for the sector.
Opportunities and Considerations
The bullish development in the gold mining space presents a compelling investment opportunity, fueled by rising inflation expectations and favorable market conditions. While the resurgence of gold mining stocks can enhance bullish sentiment, investors should be mindful of the inherent volatility and individual risks associated with investing in gold miners.
Conclusion
As the gold market embraces a bullish phase heading into 2025, gold miners are emerging from a period of underperformance. With conducive market conditions, gold mining stocks are poised for a resurgence, supported by high bullion prices and declining crude oil costs.
