Comparison: Gold Stocks vs. Bullion – Reasons for the Discrepancy

nalysts overshot the mark and expected earnings that Kinross didn’t meet. That’s in spite of an objectively strong 82% rise in earnings. But oftentimes, when markets react, they overreact.
Gold stocks as a group are barely up today, despite gold’s $23 rise, to trade just below $2,930. I think that’s entirely due to the market’s over-reaction to Kinross’s strong earnings report not being as strong as expected, despite the stock already being extremely underpriced.
Other times, inflationary pressure, rising prices, labor shortages, trouble at gold mines where a company is invested, legal surprises, and other factors can temporarily drag down mining stocks even as gold booms. In 2024, Barrick Gold Corporation (NYSE: GOLD) had to shut down a mine in Mali due to a dispute with authorities relating to new mining laws. Barrick hopes to reopen the mine, but had to revise their 2025 output projections because of the closure.
These kinds of geopolitical risks can disrupt production and negatively impact investor confidence, causing stock prices to fall even when gold prices are rising. Unlike Kinross, however, Barrick’s recent earnings and production report caused the stock to jump. But it’s still currently undervalued relative to the boom in bullion, which is likely to continue in 2025.
Gold stocks can also go down due to investors reacting to gold and silver spreads. With the gold/silver ratio currently around $90, investors may be unwinding their positions to take profits or cut losses. Another problem with the short-term valuation of gold stocks is coming from the inability of Wall Street analysts to understand and properly model when it comes to gold and gold miners. Forecasting earnings for these mining companies, in part, means having to forecast the price of bullion itself.
The Fed is not in control. Inflation is ripping as the money supply expands, prices are rising, and gold will respond with further gains. But Wall Street remains clueless about gold, which affects the valuation of mining stocks. Regardless of when Wall Street and retail investors figure it out, the yellow metal remains the undisputed safe-haven asset, especially with inflation hot and the possibility of QE later this year to “save” the system. Hard money will never change. But the broader global precious metals market is more than just physical.
With gold mining stocks potentially outperforming bullion during certain time frames, and a pattern of being undervalued during this latest bull market, diversifying into a group of winning miners is a move worth considering as gold readies to surpass $3,000 for the first time in history.