After years of choppy trading, gold is finally getting the attention it deserves from the market.

In fact, the yellow metal is hitting record highs as we’re seeing a real shift in demand from both governments and investors.

But here’s the kicker: While gold itself is soaring, gold stocks are still playing catchup. 

Let’s break down why gold is making a comeback, the disconnect between gold prices and gold stocks, and how you can take advantage of the current setup.

Why is gold gaining momentum?

Several major macro catalysts are driving the surge in gold prices.

For one thing, central banks are hoarding gold right now.

Turkey is rapidly increasing its gold reserves. While China paused gold purchases for a few months, it’s expected to resume buying soon. And many central banks worldwide are doing the same.

Why? It’s simple: economic uncertainty.

Gold has always been a safe haven in times of turmoil. Right now, there’s no shortage of uncertainty. For instance:

• The stability of the dollar: The U.S. government’s massive deficits and rising debt levels are fueling concerns about the dollar’s long-term stability—sending investors running for safety in gold.
• Inflation: While inflation may have cooled from its peak, it’s still high enough that investors want protection—and gold has always been an effective hedge against rising prices.
• Interest rate changes: The Fed has hinted at potential rate cuts in 2024, which historically benefits gold. Lower interest rates make non-yielding assets like gold more attractive.
• Tariffs: It’s also worth noting that the Bank of England is holding gold at a discount to spot prices, and U.S. investors are scrambling to get their hands on it before potential tariffs kick in.

Why gold stocks are still cheap—for now

Here’s where things get interesting: Gold prices are at all-time highs, but gold mining stocks are still lagging behind. 

Why the disconnect? A few reasons:

• Skepticism: Investors have seen plenty of false starts with gold before, so many are still waiting for confirmation before jumping in.
• Underinvestment: Large mining companies have spent the last decade underinvesting in new projects, so they’re now scrambling to secure new reserves.
• Fear of higher costs: Some investors worry that mining costs will eat into profits. At current gold prices, many miners are generating massive cash flows—but that’s not yet fully reflected in stock prices.

History tells us that the discrepancy between gold prices and gold stocks won’t last forever… 

All of this sets up a big opportunity for investors willing to bet that history will repeat itself.

How to profit: The gold stock playbook

Now that we know why gold is running and miners are undervalued, here’s how to profit from the disconnect…

1. Lower risk and steady gains: Major gold miners

If you want a safer way to play the gold boom, look at established miners like:

• Newmont (NEM): This stock is still trading well below its 52-week highs but positioned for a rebound.
• Agnico Eagle Mines (AEM): AEM is already breaking out to new highs, up about 15–16% since November—and it has plenty more momentum.

These companies are cash machines when gold prices are high, and they also pay dividends, making them a solid choice for long-term investors.

2. Higher risk, higher reward: Junior miners

Much like crypto, the vast majority of junior miners are “junk.” However, there are strong companies with high-grade projects that have been overlooked. Many of these companies are trading 50–70% below their previous highs, presenting buying opportunities. But you have to be selective… 

Here are some key factors to consider when investing in junior miners:

• Jurisdiction matters: Stick to miners operating in politically stable, mining-friendly regions (like the U.S., Canada, or Australia). Avoid risky areas where governments might seize assets or change regulations overnight.
• Strong balance sheets: Companies with low debt and plenty of cash are in the best position to benefit from higher gold prices.
• Catalysts beyond just gold prices: While rising gold prices are good for all miners, the best juniors have specific growth drivers, like new discoveries or pending acquisitions.
• High insider ownership: It’s a great sign when insiders are also shareholders—as it shows management has confidence in the company’s future.

3. The takeover angle

Major gold producers haven’t been developing new mines for years, which means they need to buy up junior miners to secure future supply. Put simply, we’re likely to see a wave of M&A activity in the sector. By investing in the best juniors with high-quality projects, you could end up owning a stock that gets bought out at a premium.

The bottom line

The setup for gold stocks right now is tremendous:

Gold prices are breaking records as central banks, governments, and investors are all piling into gold.

Meanwhile, gold miners are still trading at a discount… But if history is any guide, gold miners will eventually play catchup.

Savvy investors should look at the situation as a buying opportunity—before gold stocks close the gap. 

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