Gold Miners Should Triple Even If Gold Doesn’t Move

By Sean Brodrick

Most investors think they missed the gold rally. They’re wrong. 

What we’re seeing right now is not the end of a gold bull market … 

It’s the early innings of a massive revaluation in hard assets and the purchasing power of real money.

Gold miners are generating margins that would make Silicon Valley jealous. Central banks are hoarding bullion at a historic pace. And Wall Street still hasn’t fully priced in what higher gold prices mean for mining stocks.

Deceptive Outperformance

Sure, it seems like gold and miners are doing well. 

Since 2020, gold is up 204%. And gold miners, as tracked by the VanEck Gold Miners ETF (GDX), are up a whopping 257% over this time frame.

Gold and miners are leaving the S&P 500 in the dust!

And you can see that reflected in the profit margins of gold miners.

Here’s a chart made using the average net margin of the top 10 GDX gold miners over this time frame. I’ve added the price of gold for comparison.

Here’s a question for you: If the price of the underlying commodity has gone up 200% in six years …

And the profit margins of the companies that mine it has gone from 13% to 40% …

How much should the prices of those companies have gone up in that six-year period?

Let’s do some math. 

To make it easier, let’s use $1,000 as the base price for gold. 

• Assume gold is at $1,000. At a 13% margin, the company earns $130 in profit per ounce.

• Let’s say gold rises 200% to $3,000. At a 40% margin, the company now earns $1,200 in profit per ounce.

• The Result: The profit per ounce has increased from $130 to $1,200 — an 823% increase.

But as you can see, the price of miners isn’t up 823%. Miners, as tracked by the GDX, are up “just” 257%.

This tells me miners should be 3x higher!

Does that get your attention?

Yes, there are other factors involved. Maybe I’m off by a few percent. But I bet I’m more right than wrong.

I am sure, however, that Wall Street is missing this. 

The market is infatuated with AI — a giant money pit that makes ever-increasing demands for investment dollars — missing the cash machines parked in gold fields scattered across the globe.

What needs to happen — what will happen — is Wall Street’s attitude will change as gold miners’ profit train become impossible to ignore.

Heck, miners’ discount today would mean the GDX, which recently traded at $96.71, should be trading at $309!

The Big Move Yet to Come

That’s only if gold stands still. 

I strongly believe gold is going to $10,000 an ounce. 

I explain some of the reasons why here: “Why Gold’s Headed for $10,000 an Ounce”.

Since then, the outlook for gold has improved, as the outlook for the U.S. dollar has worsened. 

The world is de-dollarizing, as central banks around the world try to shrug off the choke-collar of U.S. financial domination. 

They’re doing that by buying gold. A LOT of gold.

In the first quarter of this year, global central banks added a net 244 metric tonnes of gold to their reserves. 

This represents a 3% increase year over year. It is also significantly higher than the pre-2022 quarterly averages of approximately 100-125 metric tonnes.

Don’t Close Your Eyes to What Comes Next

The great dollar re-rating is coming …

The price of gold is going to explode …

And the value of select gold miners is going to soar.

The GDX is fine way to play it. 

I give my favorite ideas on select stocks here.

The gold train is leaving the station. 

It’s already rolling, and it’s going to pick up speed this year. 

And you should be on it.

All the best,

Sean Brodrick