Gold Miners Surge Despite September Selloff Outperform All S&P 500 Sectors
Gold mining stocks outperformed every sector in the S&P 500 during Q3, delivering a total return of 17.4%, despite a 6.3% drop in gold prices in September. The NYSE Arca Gold Miners Index even surpassed the energy sector, which gained 17.2% on higher oil prices, while the S&P 500 itself only returned 2.3% in the same period.
The strong performance of gold miners came amid a challenging September for gold, driven by rising interest rates and a stronger U.S. dollar. The Federal Reserve raised rates for the first time in over three years, and the 10-year Treasury real yield reached 2.93%, its highest level since 2008. Despite these headwinds, gold remains down only 4% for the year as of October 2, supported by strong demand from central banks and retail investors.
China’s central bank added over 20 tonnes of gold in August, extending its buying streak to 22 months. Meanwhile, U.S.-listed physical gold ETFs attracted $3.8 billion in September, following $7.9 billion in August, indicating strong conviction from investors. The sector’s fundamentals remain robust, with free cash flow per share for miners growing tenfold since 2020 and an earnings yield of about 12%, the highest of any sector.
Despite these strengths, gold mining stocks are overlooked, making up only 2% of global stock markets. Analysts like Jeff Clark of Paydirt Prospector highlight the sector’s strong earnings relative to its valuation, suggesting potential for further growth. As the bond market continues to influence gold prices, investors are encouraged to maintain a long-term perspective, with historical trends favoring gains in October and beyond.