What makes the precious metals rally interesting

XAU/USD

Key zone: 4,150.00 - 4,250.00

Buy: 4,350.00 (on strong positive fundamentals); target 4,500-4,750; StopLoss 0.00

Sell: 4,100.00 (on a pullback after retesting 4,200); target 3,750.00; StopLoss 0.00

One of the biggest market stories of 2026 has been the extraordinary performance of gold and silver. Silver has gained 80% over the past 12 months. Gold has risen approximately 30% over the past year and more than 125% over the past five years.

The precious metals rally is impressive; however, gold is currently completing its worst quarter in nearly a decade. Prices are being pressured by the war in Iran, expectations of interest rate hikes in the United States, and the SpaceX IPO, which is “draining” liquidity from the market.

Reminder:

For most investors, such dynamics appear to be a negative signal. However, for professional market participants, the current situation is interesting for a completely different reason: for the first time in a long period, gold mining stocks are becoming more attractive than gold itself. Investors are beginning to search for the next source of returns, while the correction in gold is creating a new entry point.

Historically, gold mining stocks have demonstrated an operating leverage effect relative to gold prices. If the price of gold rises by 10%, a company's profits may increase by 20–30% or more. But this mechanism also works after corrections.

Even after gold's decline, current prices remain significantly above the levels on which most producers based their business plans. The average All-In Sustaining Cost (AISC) among major miners ranges between $1,400 and $2,000 per ounce, while gold is trading above $4,000. This means the business continues to enjoy exceptionally high profit margins.

In effect, the gold market has corrected, but the economics of gold mining remain record-breaking in profitability.

For example, with gold priced at $4,200 and production costs around $1,500, a producer retains a gross margin of approximately $2,700 on every ounce mined. The industry has not demonstrated profitability levels like these during most of the previous decade.

During the period of rapid gold appreciation, investors preferred direct exposure through ETFs and physical metal. Now that the market has entered a correction and consolidation phase, attention is gradually shifting toward companies capable of generating cash flow even without further increases in gold prices.

According to VanEck analysts, current price levels provide gold miners with record free cash flow and allow them to increase dividends, conduct share buybacks, and finance new projects without a significant increase in debt burdens.

In other words, investors receive not only exposure to gold but also a full-fledged business with cash flow.

Which companies look the most attractive?

• Agnico Eagle
  
  The company maintains stable production of 3.3–3.5 million ounces per year and forecasts an AISC of approximately $1,475 per ounce. Even at current gold prices, this provides an exceptionally high level of profitability. The company has already reported record free cash flow and increased dividends.
  
• Newmont
  
  The world's largest gold producer remains one of the primary beneficiaries of high gold prices despite rising costs, thanks to the scale of its production. Significant growth in cash flows is expected even without new all-time highs in gold prices.
  
• Barrick Mining
  
  The company trades at lower valuation multiples than some competitors and maintains a high sensitivity of earnings to changes in gold prices. Barrick's gold revenue remains among the fastest-growing among major producers.
  

And what is the result?

The problem is that investors continue to view gold mining companies through the lens of previous cycles, when high cost inflation quickly consumed the benefits of rising metal prices.

Today the situation looks different. Despite rising production costs, average profit per ounce remains at record levels. According to S&P Global estimates, most producers maintain an AISC margin exceeding $3,000 per ounce even after increases in labor costs, energy expenses, and royalties.

At the same time, many stocks in the sector trade at forward P/E ratios of approximately 10–13, significantly below the valuations of the technology sector and the broader U.S. market.

The positive scenario is not guaranteed. The primary risk is a further decline in gold below the $4,000-per-ounce zone if the U.S. dollar strengthens and the Federal Reserve begins a new cycle of rate hikes. Additional pressure could come from rising production costs and higher tax burdens in certain mining jurisdictions.

However, even in such a scenario, most major producers retain a substantial margin of safety thanks to the record gap between the market price of gold and production costs. At present, gold mining companies may prove to be a more attractive instrument than gold itself.

So we act wisely and avoid unnecessary risks.

Profits to y’all!