Investor Insights: Where next for gold prices and gold stocks?

So, the question on everyone’s lips is where next for the price of gold?

Certainly, in the short term I would expect volatility to persist. The gains on Tuesday following the sharp correction suggest that the market still faces some degree of dislocation and remains prone to large price swings, which are not being driven by fundamental shifts in the outlook for the metal or interest rates, but on speculative positioning and leverage.

Longer term the fundamentals that have underpinned the rise in the price of gold over the last 2-3 years remain in place. Gold has shifted from being a volatility hedge (look at the last week!) to being a cornerstrone asset in investors’ portfolios. We’ve also seen a shift in thinking from its status as an inflation hedge with a notable decoupling from its usual correlation with real yields. Underlying central bank demand, persistent fiscal concerns and geopolitical uncertainty remain the order of the day.

Certainly there has been at least one change in thinking in recent days relating to the independence of the Federal Reserve. The nomination by the Trump administration of former governor Kevin Warsh – with a track record as a policy hawk – has signficantly eased market concerns about the Fed running policy aggressively too hot. This remains the assumption right now at least, but it could change. We know for instance that Warsh advocates shrinking the Fed’s balance sheet, which would push up longer-dated bond yields, (higher term premia). We also know he wouldn’t have got the job had he not said he backs rate cuts. That combination of lower policy rates and smaller balance sheet would tend to support demand for hard assets.

Otherwise, we should note that many of risks driving demand for gold have not fully materialised. Central bank demand is slowing, which means private and instutional buying has more impact on prices. On the other hand, central bank demand is largely price insenstive as they target tonnage, and they are still expected to scoop up around 800 tonnes this year. Meanhile, stablecoins are playing a new emerging role underpinning demand with Tether now the largest holder outside of central banks and nation states.

We also need to consider Japan as it heads towards a snap election on 8 Feb. We don’t yet know what is going to happen but a reversal of Japan’s status as a source of cheap funding and global liquidity could have important repercussions across global fixed income markets and equities, with a push higher in yields potentially reinforcing demand for hard assets.

The correction I think will be in the long run a healthy development for gold as it will enable investors to re-enter and build positions from a more attractive entry point. The correction is not, in my view, indicative of a durable shift as the underlying drivers for price have essentially not gone away.

Gold miners: are they still worth it?

Endeavour Mining, the FTSE 100 gold miner, has been one of the most popular expressions for investors seeking indirect exposure to gold prices. After falling sharply Friday and into Monday morning it’s staged a recovery to now trade about 12% below its highs of the prior week. It comes after the companyreported it had met full-year guidance in 2025, generated record free cash flow and slashed net debt as higher gold prices sustained revenues. And though its all-in sustaining costs were about $1,435 per ounce, up from $1,218 last year, it suggests that current spot prices are still very favourable and will enable a significant increase in shareholder returns. The company reported a realised gold price of $3,244 per ounce for the year, up 38%.

Among the funds we have seen some even greater volatility than with spot prices. The VanEck Gold Miners UCITS ETF remains 22% off its record high hit on Thursday. 

The VanEck Junior Gold Miners UCITS ETF was one of the funds that rode the gold rally.It’s down more than a third from its peak on the same.

It’s been a levered bet on gold prices and enjoyed a run even stronger than the underlying price of gold. Despite its fall in the last few sessions, it has still doubled since early August. 

The issue with many of the mining stocks, particularly smaller ones, is that while they may produce outsized gains on the way up they can deliver outsized losses on the way down.

The reasons are simple enough. Costs go up with the price of gold – eg higher royalties are demand from countries where they mine, higher prices encourage miners to go after hard-to-mine grades, and gold often goes up because of inflation is higher, which means higher labour, fuel costs, etc. When gold prices fall, costs can take longer to come down, pressuring profits.
There is a lot going on with gold right now - it may be a good time to consider your exposure and think about diversification benefits from adding miners to your portfolio.