Gold Edges Down As Fed On Hold

Gold near flat after Fed refrains from rate hike

The gold price declined -0.5% to US$4,049/oz, as the US Fed maintained rates after the market saw a reasonable probability of a rate hike, with a higher interest rate widely expected by the end of this year given the continued high inflation.

Big Gold sees continued strong quarterly results

The Big Gold companies continued to see strong quarterly results, with only Barrick and Gold Fields still yet to report, and a high and rising metal price yoy far offsetting a decline in production and increase in costs for most of the majors.

Gold stocks see moderate declines

The gold stocks declined on the drop in the metal price, with the GDX down -1.5% and the GDXJ losing -2.5%, while the overall equities markets were mixed, with the S&P 500 up 0.3%, the Nasdaq gaining 1.0% and the Russell 2000 down -0.5%.

Gold Edges Down as Fed on Hold

The gold price declined -0.5% to US$4,049/oz, with the key economic driver the US Fed’s decision to keep interest rates on hold at its meeting last week. The markets had seen some chance that the Fed could have hiked rates, given high inflation and a strong jobs markets, and the Central bank’s dual mandate to control prices and maximize employment. There were a relatively high three of the nine Fed board members that actually dissented on the decision, and voted to increase interest rates by 0.25%. The market is widely expecting a rate hike by the end of the year, however, with the probability of a hike at the September 2026 meeting at 65%, for the October 2026 meeting at 75% and by the December 2026 meeting at 86%.

This had gold continuing to trade in the range of around US$4,000/oz-US$4,200 that has held for over the past two months, and seems to indicate that the large pullback in the price that drove out a wave of speculation in early 2026 may now be over. The equity markets were mixed on the news, with the S&P 500 up 0.3%, the Nasdaq gaining 1.0% and Russell 2000 down -0.5%, likely on expectations that the Fed decision may have only delayed a rate hike by a few months. Gold stocks saw moderate declines, with the GDX down -1.5% and GDXJ losing -2.5%.

The most recent inflation data and oil prices appear to continue to support an eventual Fed hike this year. US headline inflation pulled back in June 2026 to 3.5% from its peak of 4.2% in May 2026, which is still quite high, and while the Fed focuses more on core inflation, even that looks elevated at 2.6%, and is still above the 2.0% target (Figure 4). While the oil price, which has been the major driver of this inflation, has dropped significantly, with Brent Crude at US$82.1/bbl, off a US$117.3/bbl peak in April 2026, this is still 19% above the average for 2025 of US$69.1/bbl (Figure 5).

Gold sector more balanced versus early-2026 boom

The oil and gas and energy sectors have continued to lead the global markets in 2026, even with the pullback in the oil price, up 38.5% and 30.1% this year, and their valuations still remain low (Figure 6). This contrasts with the very high multiples for global tech, which has gained 25.3% for the year, even after the recent severe decline in the semiconductor stocks in South Korea. The mining sector overall has actually done quite well this year, with the MSCI Metals and Mining ETF up 13.0%, from its high exposure to copper and iron ore, with the former especially strong this year, with a lower contribution from gold. The gold producers have plunged from the strong global sector in early 2026 to the worst performer, with the GDX declining -13.6%.

However, with the speculative excesses from earlier this year now over, the gold price maintaining a new average still more than enough to drive strong earnings, and valuations at more moderate levels, we view the gold sector as much more balanced and earnings more sustainable than at the start of the year. This contrasts with the recent extreme volatility in some tech stocks, and extremely high expectations from the market for earnings, which leaves the sector looking reasonably precarious.

The GDX’s decline is actually towards the middle of the price performance for the major mining ETFs this year, with major drops especially for the uranium and nickel stocks, down -20% and -23%, respectively (Figure 7). The performance of the gold juniors, which tends to be very correlated with the gold majors, has been just slightly behind the producers this year, with the GDXJ down -16%. The SIL ETF of silver stocks has slightly outperformed this, down just -11.0%, while the COPX ETF of copper stocks has gained 8.0%, with this sector in turn the major driver of the 11.0% gain in the base metals stocks (Figure 7).

Big Gold’s strong Q2/26 results continue

Most of the Big Gold companies have now reported their Q2/26 results, with Lundin to follow this week, Barrick’s out early next week, and Gold Fields and Evolution reporting relatively late, towards the end of this month (Figure 8). The group overall continues to see strong growth, driven a gold price which was still up significantly yoy to above the US$4,000/oz level, even given the substantial decline from its peak early this year well above US$5,000/oz. This has offset an overall decline in production for these majors, which all face the issue of an ongoing depletion of reserves, which also provides a major opportunity for the juniors in terms of discovering new deposits. There has also been major increases in costs especially on the surge in energy prices.

There have been substantial declines in production yoy for all of the group, with the largest drops from Newmont and Anglogold Ashanti, down -12.5% and -7.5% (Figure 9). The gold output of both Kinross and Alamos was down by similar levels of -4.0% and -4.8%, with more muted declines for Agnico Eagle and Northern Star, off by - 1.2% and -2.4% yoy. However, revenue still increased substantially for all the companies as the declines were far offset by the rising gold price, with Newmont still up 15.1% yoy even given the more significant decline in output. The rest of the group saw much higher gains, with Agnico Eagle, Anglogold, Kinross and Alamos up 35.0%, 27.0%, 29.5% and 35.6%, respectively (Figure 10). Net income surged yoy for most of the group, with Agnico Eagle, Anglogold and Kinross up around 50% and Alamos’ 70% gain the strongest, although Newmont had a relatively muted 7% increase, given that it had by far the most severe decline in production.

Costs soar on rising energy prices

While Big Gold’s earnings growth remains strong on the high gold price, costs have surged on rising energy costs. The AISC in Q2/26 for Kinross and Northern Star jumped by almost US$500/oz yoy, increasing US$468/oz and US$460/oz, which would have been seen a major squeeze in margins for the companies in any period before the H2/25 surge in the gold price. While the increase has been moderately lower for Anglogold Ashanti and Newmont, at US$373/oz and US$345/oz, this is still a significant surge in costs. The rise in AISC has been the lowest for Alamos and Agnico Eagle, but they still saw increases of US$247/oz and US$178/oz.

The issue now is whether high costs will continue, given that they are mainly driven the jump in energy prices, which do tend to be volatile, and could actually revert rapidly if there are peace deals in the Middle East that hold. There has again been announcements of a ceasefire in the region with talks to be held this week, but this has happened already several times over the past few months. While the probability that oil jumps back to well above US$100/bbl appears relatively low, it does seem likely there will be enough risk in the region that oil price could remain elevated for the rest of the year, and up versus last year.

The pressure from both the decline in the gold price since the start of the year and these rising costs have driven down valuations for the large gold companies to moderate levels. A price to book to return on equity valuation for the sector does not indicate significant over or undervaluation for the largest companies by market cap, Newmont, Agnico Eagle, Barrick, Anglogold Ashanti and Kinross, which all trade very close to the valuation line (Figure 13). While Northern Star, Alamos and Evolution trade moderately above the line and Gold Fields trades below it, they do not appear to be severe outliers.

Major producers and TSXV gold mostly down

Most of the major producers and TSXV gold were down as the metal price declined (Figures 14, 15) For the TSXV gold companies operating mainly domestically, Gold X2 Mining completed its share consolidation (Figure 16). For the TSXV gold companies operating mainly internationally, Benz reported Q2/26 results and Goldgroup appointed an interim CEO (Figure 17).