Mining Stocks Surge as Haven Demand Rises

The mining sector is resurging as gold continues to record new heights due to ongoing trade tensions and economic uncertainties, but questions arise about the sustainability of the trend and where the ceiling is.

All Aboard the Gold Rocket

Gold prices popped above $3,500 per ounce on Tuesday after scoring a new record high just the day before. The rally was largely attributed to increased demand for safe-haven assets amid tariff uncertainties, coupled with US President Donald Trump's threat to fire Fed Chair Jerome Powell. While Powell's removal is considered legally unlikely, Trump has voiced similar rhetoric towards his own appointee in the past. His push for lower interest rates, combined with a faltering US economy and a weakening dollar, could provide further impetus for gold prices to skyrocket.

Notably, gold has reached a new record in real terms, i.e. when adjusted for inflation, surpassing a milestone set in the late '70s. Back then, the period was marked by the closure of the gold window, rampant inflation, and a bout of economic stagnation that left the market underperforming for several years while the Fed had to raise rates into double digits to control runaway inflation. This could signal genuine market concerns or suggest that worries have become overblown, potentially leading to a correction. Regardless, analysts have turned bullish, with some projecting gold to reach $4,000 per ounce by mid-2026, citing eroding confidence in the US dollar and expectations of a US recession in the latter part of 2025.

What Stocks Are Surging

As expected, gold mining stocks are basking in the spotlight. Newmont, the go-to name in gold mining, is up around 50% this year - one of the best-performing stocks in 2025. Other miners, such as Agnico, Kinross, and AngloGold Ashanti, have also seen strong surges. Nonetheless, some analysts argue that gold mining stocks remain undervalued given the current circumstances, suggesting further upside potential if gold prices maintain their current trajectory.

The numerous mining companies that carry significant gold interests could provide a boost to the FTSE 100, with copper miners potentially benefiting as gold and copper are often mined together. Additional support could come from further easing by the BOE, as central banks worldwide join the race for lower interest rates amid concerns of a global economic slowdown. Markets anticipate another rate cut when the BOE meets next, with economists forecasting further cuts later in the year. While this could potentially put pressure on the pound, the US dollar has been even weaker as investors reverse the "American exceptionalism" trade that propelled US equities higher late last year.

Newmont Inverse H&S Signals Reversal

Newmont (NEM) may have potentially completed an inverse head and shoulders pattern, validating a bullish reversal that has been in the making for years. The break above the neckline ($57-$59) could open the door for a measured move towards the record high of $86, reached back in 2022, with interim resistance levels at $62 and $70. Even a correction down to $48 or the shoulder bottom of $36 would not change the formation, but a slide as substantial as that would probably invalidate it.

Source: SpreadEx / NEM

Key Takeaways

The mining sector, particularly gold miners, is seeing a surge due to escalating trade tensions and economic uncertainties. As gold prices continue to climb, even reaching new inflation-adjusted highs, Newmont is leading the charge higher. While concerns arise about the sustainability of the rally, analysts expect gold, and subsequently miners, to soar higher, especially as central banks ease and the US dollar is weakening.