Key Takeaways
- Physical gold can offer capital gains, while mining stocks offer dividends and buybacks.
- The price of gold continues to break records, driven by geopolitical risk and US interest rate cuts, but gold miner stocks are rallying even more.
- In 2025 gold mining stock ETFs have returned between around 100% compared with 30% for physical gold ETCs.
Gold has staged a big rally in 2025 as investors sought a safe haven from global political and economic turmoil. But lately, the stocks of gold mining companies have made even bigger gains.
The price of spot gold has gained more than 40% so far this year in US dollar terms, rising to USD 3,719 from USD 2618, with a roughly 30% gain for physical gold exchange-traded commodities when measured in pounds. Investors can gain exposure to movements in the gold price through ETCs, which trade on the stock market like ETFs.
However, ETFs that hold gold mining stocks have returned between 96% and 110% since the start of the year in pounds.
In 2023 and 2024, it was the reverse dynamic. The iShares Gold Producers ETF SPGP which owns large gold miners such as Newmont NEM, Agnico Eagle Mines AEM and Barrick Mining B, delivered a return of 4.42% in 2023 and 13.47% in 2024, compared with 7.25% and 28.7% for the iShares Physical Gold ETC SGLN.
Mining stocks can track the price of gold, but the relationship isn’t exact. Mining stocks are more volatile than the price of gold and amplify the movements of the precious metal. And the two asset classes play very different roles in a well-diversified portfolio.
The return difference between physical gold and gold mining stocks is a reminder that the two investments can follow different paths.
Currency can also have an impact, as the pound has this year appreciated significantly against the dollar, in which spot gold is priced.
What is the Relationship Between the Gold Price and Gold Mining Stock Prices?
“Gold mining businesses can be considered as a leveraged bet on gold prices due to their operational leverage,” says Nicolò Bragazza, associate portfolio manager at Morningstar Wealth. “Their cost structure tends to amplify the impact of gold prices on margins, thereby causing gold miners’ stock prices to move more than gold prices.”
So, with relatively high fixed costs, their profits are limited when gold prices are low, but rising prices can lead to a significant boost in profit margins.
This relationship between mining companies and the commodity price can be examined using the beta of the Morningstar Global Gold Index, which includes gold miners, against the gold price. Over a 36 month-period, the gold price and the index have a beta above 1, which means they have moved in similar directions and been more volatile than the wider market.
The returns profiles of both gold stocks and the gold price have been similar over three years, the chart below shows. But gold mining stocks have been more volatile in that period and have outperformed significantly this year.
Should Investors Buy Physical Gold or Mining Stocks?
“It depends on their portfolio objectives,” Morningstar’s Bragazza says. “Physical gold exposure is preferable to get an outcome more closely aligned with gold prices, whilst more risk or income seeking investors may be more interested in leveraging up their gold exposure by buying gold miners who can provide also some form of income via buybacks and dividends.”
Mining stocks have the advantage of being companies and therefore they can provide this kind of income stream for investors. This is not possible for physical gold investing, where its only source of return is in its price increase.
“On the other side, physical gold investing provides a closer tracking of gold prices, and it avoids the business cyclicality of gold mining,” says Bragazza.
“An investor interested in bringing the diversifying characteristics of gold into portfolios is more likely to prefer exposure to physical gold, rather than mining companies,” he adds.
What Has Been Driving Gold Prices and Gold Mining Stocks?
Since November 2022, when it hit its lowest level in the post-pandemic era, the price of gold has gained around 125%, setting more than 30 records in 2025 in nominal terms, with this month’s rally taking it above an inflation-adjusted peak set more than 45 years ago.
“A key driver of the recent leg up has been expectations that the Fed is ready to embark on a second wave of easing, having kept rates on hold so far this year,” says Mark Haefele, chief investment officer at UBS Global Wealth Management, who expects now bullion to reach USD 3,900 per ounce by June next year, up from the previous forecast of USD 3,700.
Lowering interest rates puts pressure on the US dollar, making dollar-denominated assets like oil and gold cheaper for global investors.
