Why The Gold Stock Rally Isn’t Over Yet

Key Concepts

• Gold Cycle: The cyclical nature of gold’s performance, often inversely correlated with “risk-on” assets and influenced by credit conditions.
• Margin Expansion (Gold Miners): The potential for gold mining companies to increase profitability due to gold prices rising faster than input costs.
• Credit Tightening: A reduction in the availability of credit, often associated with gold’s positive performance.
• Risk-On vs. Risk-Off Assets: Categorization of investments based on their perceived risk level; “risk-on” assets (e.g., tech stocks, Bitcoin) tend to thrive in economic expansion, while “risk-off” assets (e.g., gold) often perform better during uncertainty.
• Basis Points: A unit of measurement used in finance to describe percentage changes in interest rates; 100 basis points equals 1%.

Gold’s Continued Potential: An Analysis of the 2025 Rally

The video discusses the potential for continued gains in gold and gold mining stocks following a significant rally in 2025. Gold experienced a 65% increase, rising from $2,600 to over $4,300 per ounce. Gold mining stocks, as represented by the VANC Gold Miners ETF (with $29 billion in assets), outperformed, achieving a 155% return. The central argument, presented by Daniel Oliver of the Mermikin Gold Fund (managing approximately $30 million as of 2023), is that this rally is not over and the gold trade is still in its early stages.

Shifting Market Dynamics: 2024 vs. 2025

Oliver’s analysis hinges on a shift in market leadership. In 2024, speculative “risk-on” assets like big tech stocks and Bitcoin led market returns, while gold and gold mining stocks lagged. However, in 2025, this pattern reversed. Speculative assets cooled down, and gold moved to the forefront, followed by mining stocks. This shift is crucial because Oliver posits that gold historically performs best during periods of credit tightening, not expansion. He highlights that this is currently being observed, despite the Federal Reserve cutting short-term rates.

The Credit Environment and Commodity Price Disconnect

A key indicator supporting this claim is the yield on 30-year Treasury bonds, which has risen by 50 basis points since September 2024, coinciding with the Fed’s easing monetary policy. This suggests potentially weaker credit growth than typically expected during rate cuts. Oliver argues that this environment favors gold over industrial commodities. He explains that when credit is tight, gold often rises faster than other commodities. This dynamic is supported by historical precedent.

Historical Parallels: The 1970s Gold Boom

Oliver draws a parallel to the 1970s, when gold prices rose by 1,400% while industrial commodities lagged. Copper, for example, only gained 45% during the same period. He believes similar dynamics are re-emerging, with gold poised to outperform industrial commodities in the current slow-growth environment.

Input Costs and Margin Protection

A common concern regarding gold miners is rising input costs eroding profit margins. However, Oliver contends that this isn’t a foregone conclusion this cycle. He anticipates that oil prices will remain contained due to increased US supply and weakening long-term demand. Given that energy is a significant mining input, slower energy inflation will help protect margins. Furthermore, he believes most industrial commodities will struggle to keep pace with gold in a slow-growth scenario, allowing gold miners to experience margin expansion rather than compression.

2025 Gains as a Bull Market Indicator

Oliver views the substantial gains in gold mining stocks during 2025 not as a signal to exit, but as evidence of the beginning of a longer bull market. He explicitly states that the 2025 performance “looks more like the start of a longer bull market than the end of one.” He acknowledges his position as a committed gold advocate, but bases his argument on observed market behavior and historical trends.

Data and Statistics

• Gold Price Increase (2025): 65% (from $2,600 to over $4,300 per ounce)
• VANC Gold Miners ETF Return (2025): 155%
• Mermikin Gold Fund AUM (2023): Approximately $30 million
• 30-Year Treasury Bond Yield Increase: 50 basis points since September 2024
• Gold Price Increase (1970s): 1,400%
• Copper Price Increase (1970s): 45%

Conclusion

Daniel Oliver’s analysis suggests that the gold rally is not over, driven by a unique combination of credit tightening, historical precedent, and the potential for margin expansion within the gold mining sector. The shift in market leadership from speculative assets to gold, coupled with a favorable commodity price environment, supports the argument for continued gains. While acknowledging his inherent bias, Oliver presents a compelling case based on observable market dynamics and historical data, positioning gold and gold mining stocks as potentially attractive investments in the current economic climate.