Even after the start of the gold rally in the spring of 2024, miners response has been lackluster. Miners only started to get traction well into 2025 after the yellow metal had breached the $3000 ceiling.
On Valentine's day of 2024, gold jewelry was still affordable, with bullion last quoting below $2000/Oz.
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History:
That $2000/Oz threshold had first been broken during the pandemic
lockdown in 2020. Discretionary spending was down since shopping
malls were empty. Governments were running large deficits. After
the initial market plunge, there was a selective recovery with
gold enjoying a major tailwind. It didn't last: gold retreated
late 2020 and over 2021. Despite inflation spiraling out of
control during 2022, the interest rate hikes kept gold down for
longer than could be anticipated. Some dips below $1700/Oz were
real bargain opportunities. In 2023 a stealth recovery started.
During the spring rally $2000 was regained, only to be given back
weeks later. It would take until late november to regain $2000/Oz,
making 2023 the first year with gold ending above $2000/Oz.
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The below graph shows the gold price since the start of 2024. The onset of the rally has been hesitant. By June 2024 gold was trading around $2300/Oz, the yellow metal gradually firmed, first reaching $2500 by mid August.
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Gold price since the start of 2024 (Daily Spot prices on NYMEX)
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Against the perspective of a lasting gold rally, with only minor corrections and more consolidation phases, the initial miner response has been disappointing. Only since early 2025, with gold already up over 30%, miners eventually started responding to the ongoing gold rally.
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HUI/Gold since the start of 2024 (HUI = Index of unhedged gold and silver miners)
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With gold almost flat during Jan-Feb 2024, miners plunged until the onset of the rally was confirmed. The manic depressive mood swings continued during summer, despite gold hitting $2500/Oz. The Trump victory in Nov 2024 brought about a short lived and shallow gold correction. Another depressive phase for gold miners followed, leveraging down the gold correction manifold.
The Trump inauguration sparked the second rally phase, with a minor hicup only after $3000 had been first breached. The HUI/Gold ratio slid back a few times to its level at the start of 2025, these were the last depressive stages. After gold had proven that $3500/Oz was not a single day peak level, mining investors eventually started believing. We have seen a nice rally during last few months with the miners now outperforming the metal.
HUI - Gold regression
Searching for patterns and possible guidelines may corroborate investor confidence. It also allows to quantify the probable loss an investor may likely face during a gold correction. Such linear regression corresponds to the idea that mining margins expand as the gold price is rising. The classic belief of 'leverage to gold' is thereby quantified.
The past has however shown that though linear regressions may last a few years, they are not valid guidelines over the long haul. Regressions tend to fail in the same way: miners cannot catch up with the series of regression predictions and start lagging. Regression errors are becoming systematically negative thereby invalidating the relationship.
Previous articles illustrating this are:
HUI to Gold regression revisited (31 Aug 2019) This article includes an overview of previously observed HUI - Gold regressions which have subsequently been invalidated.
Why HUI-Gold regressions can't hold over the long haul
All-in sustaining costs (AISC) of mining tend to rise over time. This affects the 'intercept' of the regression line which gives a rough idea of the median level of the AISC.
Technological break-throughs in precious metal mining are rare and far in between. Moreover they tend to eanble a profitable exploitation of ore bodies which would not have been economically viable before. The result has been that the average gold grade of ore mined today is much lower than it used to be. Hence technological break-throughs increase the global output but do not reduce average mining costs.
Investment costs
Major discoveries are less frequent than before. Moreover the time for development and permitting is getting ever longer, especially in North America. Policy changes may delay or interrupt mining operations in some Central and South American countries. Political risks are even larger in much of Africa and Asia.
Mines are a 'wasting asset'. Eventually the get depleted and need to close down. Environmental remediation is a termination cost, which needs to be anticipated.
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