Gold Miners Eclipse Chip Stocks in August Rally

Gold miners have stolen the spotlight from chip stocks in recent weeks, with the MSCI global gold miners index rising 43% in August, according to Bloomberg. This significant surge is attributed to the unexpected expansion of bond buybacks by the US Treasury, which has pushed down borrowing costs and revived the 'debasement trade', the view that weakening purchasing power in currencies such as the dollar will increase demand for alternative stores of value.

The price of gold has climbed 13% this month to above $4,500 an ounce. The rise is particularly beneficial for miners, whose earnings can rise faster than bullion prices as higher gold prices expand margins.

Bullion-backed ETF holdings have recorded their strongest increase since September, and central-bank buying, constrained supply, and portfolio diversification are reinforcing the longer-term investment case. Large-cap miners such as Zijin Mining have gained 14% this month even as the Hang Seng Index declined 1%.