When Will Gold Stocks Go Up? Experts Talk Outlook for Equities and Price

Central banks buy gold, not equities

Adrian Day, president of Adrian Day Asset Management, noted that it's not unusual for gold to rise first.

“That’s always the way at the beginning of a bull market," he told attendees.

"You have to have a catalyst — a great drill result, or a great discovery, or something to make the stock go up. A rising tide raising all ships doesn’t really happen until the end of the bull market,” he said.

What is unusual is how this bull market got started and how slow gold equities have responded.

Continuing, Day explained that since 2022, the gold price has gained more than 70 percent, but it’s not investors who have driven the impressive rise — rather, it's central banks looking to diversify away from the US dollar.

"The People’s Bank of China is not going to be buying stocks to achieve that objective, and so the people who have been driving the gold price for the last two years are buying physical gold. They’re not buying gold stocks,” he said.

This statement was reinforced by Randy Smallwood, president and CEO of Wheaton Precious Metals (TSX:WPM,NYSE:WPM), and former chair of the World Gold Council.

“This bull market started unlike any other bull market that we’ve seen in my time in this industry," he said.

"It’s (being driven by) an investor group that doesn’t chase exchange-traded funds (ETFs) — we saw ETFs actually drop over the last couple of years; now they're starting to bounce back up again — and they don’t invest in equities. So all the evidence supports that this bull market really started from a different spot than we’ve ever seen before."

According to Smallwood, these circumstances have created an unusual market dynamic. The price of physical metal has soared, while equities and investment products like ETFs have lagged.

Similarly, Equinox Gold (TSX:EQX,NYSEAMERICAN:EQX) Chair Ross Beaty referred to the current situation as “weird” and “unnatural,” pointing out that gold and gold equities have historically moved in tandem.

“Starting in about 2022 or 2023, after the Russian invasion of Ukraine, a lot of these big central banks decided to move away from the dollar into other asset categories like gold, and so now we have this crazy disconnect,” he said.

However, Beaty went on to note that even with this strangeness, the market remains bullish in 2025. Ultimately, he's of the opinion that either the gold price has to fall, or gold stocks have to rise.

"I don’t see why gold prices should come down; therefore, I think it’s a pretty good time to be buying,” Beaty said.

Why don't investors like gold stocks?

One challenge that may be driving investors away from gold stocks is how companies manage capital costs.

Smallwood said that as the gold price rises, producers are chasing lower gold grades, which is more difficult and costly. As a result, even with a higher gold price, companies aren’t increasing margins.

“As soon as lower-grade material becomes economic, the cost per ounce is going to climb,” he said.

Beaty added to Smallwood’s point, saying that gold-mining companies face additional headwinds from debt, equity dilution and project risk. He cited his own experience at Equinox Gold.

“We have US$1.3 billion in debt, for example. Nobody likes debt," he noted.

"We just finished a huge mine construction last May, and a week before the mine opened our partner said they wanted to sell their interest, and we bought it for a billion dollars. So we had a lot of these things that tend to discourage investors in the sense that when you raise more equity capital, it’s not a great thing to do,” Beaty continued.

For his part, Day said that western investors have not been interested in gold for some time.

He told listeners at the event that until about 2010, the majority of mutual funds offered investors exposure to gold. Today, only dedicated gold funds offer any exposure. Investors just aren’t interested.

“In my view, they’ve been burned too many times since 2011. Sometimes it’s the industry’s fault, sometimes it isn’t. In 2011, companies were going out and making questionable acquisitions, overpaying for marginal deals, and most of that money ended up being written off. So when a generalist buys the best companies and then six years later they’re down 50 percent, they say, ‘I’m not sure I understand this sector, but I know for certain I don’t want to invest in it,’” Day said.

Beaty said investors are also being put off by the gold industry’s current lack of interest in consolidation.

“For a mining company to stay in business, they either have to discover, or they have to buy — they have to replace the reserves one way or the other, because they’re simply depleting every single day of a mine’s life," Beaty said.

"So there’s a natural built-in ability for smaller companies and feeder companies to discover things that the larger companies want to buy."