Gold Break Out Continues

Gold price surges for second week

Gold surged 6.1% to US$3,640/oz, and has gained 7.8% over the past two weeks, Icon and logotype combination as the metal breaks out of an over four-month range of $3,200-US$3,400/oz, which appears to be driven mainly by expectations of a September 2025 Fed rate cut.

Gold sector passes another ‘Bubble Check’

This week we do another ‘Bubble Check’ of the gold sector, which was largely passed, with the metal price not extremely excessive versus key comparable assets and while company valuations are no longer clearly inexpensive, they are not particularly high.

Gold stocks continue to hit new highs

The gold stocks continued to reach new highs with the GDX up 5.0% and GDXJ gaining 6.0% on the rocketing metal price, while equities remained relatively flat, with the S&P 500 down -0.1%, the Nasdaq up 0.3% and Russell 2000 adding 0.4%.

Gold Break Out Continues

The gold price rocketed up 6.1% to US$3,640/oz and has gained 7.8% in just two Icon and logotype combination weeks, dramatically exiting over four months in a US$3,200/oz-US$3,400/oz range. This appears to have been driven especially by expectations that the Fed will finally start reducing rates at its September 17-18, 2025, meeting, after remaining on hold this year, joining all the other major global central banks which have all already made extensive cuts this year. There was some support for a potential cut this week from economic data, including both of the major US payroll numbers which came in below expectations. The US$ also declined as a drop in rates could lower the yield spread between the dollar and other major regions and potentially drive outflows from the currency. Both the broader economic risk implied by the weak employment data and the decline in the US$ could be expected to be supportive of the gold price.

The jump in the metal price drove up gold stocks, with the GDX rising 5.0% and GDX increasing 6.0%, although equities overall were relatively flat, with the S&P 500 down -0.1%, the Nasdaq gaining 0.3% and the Russell 2000 adding 0.4%. The gold stocks increased their lead year to date over the markets and major sectors, with the GDXJ and GDX up 89.3% and 87.7%, and TSXV Mining, which is heavily exposed to gold, up 71.9%. While the China tech boom faltered this week, the sector is still up 34.0%, more than doubling US Tech’s 14.6% gain (Figure 4). All these sectors are significantly ahead of the S&P 500, which has risen just 10.4% so far this year, with domestic tech sector not the driver it was in the previous two years. US Tech has even been surpassed by the MSCI Metals and Mining ETF, up 19.6%, even though it is heavily exposed to the iron and copper prices, which have lagged the gold price considerably so far this year.

While platinum stills leads the precious metals year to date, it has declined to a 36% gain, with gold catching up to a 33% increase, and silver and palladium prices are Icon and logotype combination both up 21% (Figure 5). All of these metals are driven by monetary factors to varying degrees, especially gold, where it accounts for almost all its demand, with silver, platinum and palladium having a mix of both monetary and industrial drivers. The base metals are almost entirely driven by the industrial cycle, and have lagged the precious metals considerably this year, with even outperforming iron ore up just 8%, aluminum gaining 4%, copper 1%, nickel down -1% and zinc by 2% (Figure 6). Such a large split between these two groups implies quite stagflationary expectations, with a major continued monetary expansion priced into the precious metals and relatively weak industrial growth suggested by the underperforming base metals.

Japanese bond yields hit 1.63% for the second time in two weeks, their highest level since 2008. This has driven down the spread in the 10-year yields between Japan and the US to just 2.52%, from a recent peak of 4.11% in October 2023 (Figure 7). This has put the Japanese carry trade in jeopardy, and in turn could be limiting a key source of financing for global markets. Markets could previously borrow at very low rates in Yen and then invest in other higher yielding markets and make a significant spread. While a relatively weak Yen in recent years has also supported the trade, with lows of up to JPY160/US$ over the past few years, it has also recovered three times to JPY140/US$ (Figure 8). If the rising yields eventually seen the Yen break through this ceiling, it could further diminish the carry trade. An unwinding of the Japan carry trade has historically been disruptive to markets, which could be partly hedging such a risk with gold.

Another ‘Bubble Check’ for the gold sector

Given the big surge in the gold sector, this week we again examine some fundamentals to determine if a bubble is developing. Two key ratios to check are those versus its closest comparable, silver, and the main proxy for the industrial sector, copper. While the gold to silver ratio was clearly excessive at its April 2025 highs of 104.7x, versus a medium-term average of 82.3x, this was corrected by the silver surge, with the ratio down to just 85.4x (Figure 9). While silver is a hybrid, driven by monetary and industrial factors, and market seems focused on the former.

This severely contrasts with the copper to gold ratio, which has dropped to just 0.0013, far below its medium-term average of 0.0020 (Figure 10). The major Icon and logotype combination divergence between these two ratios further supports a thesis of stagflationary expectations by the markets, with a monetary expansion driving up the precious metals but relatively low industrial growth not supporting a major rise in copper.

Gold can also be compared to other commodities, including the oil price and the broader CRB index for the sector. The gold to oil ratio at 48.0x is far above the medium-term average of 27.0x, although this is partly because oil production is at all- time highs both globally and in the US, which has put pressure on the price (Figure 11). The gold to CRB commodities index ratio at 9.7x is also above the medium-term average of 7.1x, but this is moderate compared to the gold to oil ratio (Figure 12). Commodities prices may also be subdued by the same concerns of potentially slow economic growth that have been pressuring the base metals prices this year.

The gold stocks can be compared over time and with other sectors from valuations reported directly for their ETFs. In absolute terms the valuations are far higher than they were a year ago, with the GDX ETF of gold producers price to book (P/B) at 2.9x, versus just 1.9x in July 2024, which could no longer be considered clearly inexpensive. However, versus other major global sectors, gold is still only towards the middle, with industrials, consumer staples and healthcare all higher with P/Bs of 4.0x. The tech sector still trades at over twice these levels, at 8.5x, even after coming down from 9.2x at the start of the year. Utilities, energy and real estate all trade below the gold sector and the MSCI Metals and Mining ETF has the lowest multiple of just 1.5x, because of a large exposure to lagging iron ore and copper prices.

Another major indicator is inflows into gold ETFs which tend to be driven mainly by retail interest, with extended high inflows potentially showing overly bullish sentiment on the sector. Gold ETF inflows were reasonably high as of the most recently reported August 2025 figures, at US$20.9bn (Figure 14). However, this was after relatively low inflows in July and June 2025 and net outflows in May 2025, after huge inflows in April and March 2025, including US$39.2bn for the latter, the highest level ever. While this still puts the sector on track for its largest annual ETF inflows ever with 8M/25 at US$136.7bn, the most recent months indicate retail has been somewhat more cautious on the sector.

Most major producers and TSXV gold jump

Most of the major producers and TSXV gold jumped on the rise in the metal price (Figures 15, 16). For the TSXV gold companies operating mainly domestically, Snowline Gold closed its public financing and private placement, New Found Gold announced metallurgical test work from Queensway and its acquisition of Maritime Resources, Amex updated its PEA for Perron and Tudor completed its acquisition of American Creek (Figure 17). For the TSXV gold companies operating mainly internationally, Robex reported an amendment of its US$130mn facility, Founders announced drill results from Antino and Gold Reserve filed a Notice of Objection to the Amber Energy bid for CITGO and clarified that reports that Amber’s bid included a $500mn payment to Gold Reserve were incorrect (Figure 18).

New Found’s market cap at CAD$570mn and Maritime’s at CAD$204mn would put the combined entity around CAD$900mn (Figure 19). Maritime operates the Hammerdown project, which is close to New Found’s Queensway project, allowing for the use of the same infrastructure, including the Pine Cove Mill and Nugget Pond Hydrometallurgical Gold Plant. The current resource estimate for Maritime is 0.36 mn oz Au Indicated and Inferred Resources, which is just under 20% of the current Queensway Measured, Indicated and Inferred Resources of 2.0 mn oz Au (Figure 20).

Amex’s new Perron PEA stands out for a production increase to 1.68 mn oz Au over eighteen years from 1.01 mn oz Au over ten years (Figure 21). While initial capex declines to US$106 mn from US$166 mn, sustaining capex rises to US$279 mn from US$166 mn, with AISC rising to US$1,061 mn from US$739 mn. The NPV is expected to rise to US$784mn from US$380mn, with the gold price increased to US$2,500/oz from US$2,000/oz.