Gold’s Surge Pulls Miners Higher, But “Fast Money” Fuels Discipline Crisis in the Sector

TradingKey - This week, gold prices surged past the $4,000/oz milestone, fueled by expectations of Fed rate cuts and ongoing economic and geopolitical uncertainty. Yet even stronger than gold itself has been the performance of gold mining stocks, which have doubled year-to-date — outperforming not only AI stocks but also Bitcoin and most major asset classes. With this explosive rally, industry voices are now warning of a looming crisis of financial discipline.

As of October 9, the S&P Global Gold Industry Index has soared 126% in 2025, making it the best-performing sector within the S&P index universe. Major miners like Agnico Eagle, Barrick Gold, and Newmont have all more than doubled. Zijin Gold International, which listed on the Hong Kong Stock Exchange last month, has already doubled from its IPO price — marking the second-largest Hong Kong IPO of the year.

Despite the intense market buzz around record-breaking Bitcoin and high-flying tech stocks, their returns pale in comparison:

• Bitcoin: Up ~29% YTD
• Nvidia: +41%
• Oracle: +73%

Meanwhile, gold is up about 54% in 2025 — but gold miners have delivered far greater leverage due to their fixed production costs: higher gold prices flow directly into profit margins, amplifying earnings growth.

The Discipline Challenge: History Repeats?

After such a rapid rise, investors and analysts are sounding alarms over capital allocation discipline across the sector. Key concerns include:

• Excessive M&A activity
• Executive compensation practices
• Shareholder return policies

These risks echo the aftermath of the 2011 gold bull market, when gold peaked near $1,900, and mining stocks subsequently plunged 79% over the next four years — largely due to poor capital decisions, including overpriced acquisitions and bloated executive pay.

VanEck stated:

“It’s been a very good year for gold stocks. They have more cash than they know what to do with.”

George Cheveley, Investment Manager at Ninety One, said:

“A lot of value was destroyed. In investors’ minds, it’s still fresh. The mistakes these companies made in the previous cycle, and some scepticism, will those mistakes happen again?”

The core challenge facing gold companies: what to do with an avalanche of free cash flow?

BMO Capital Markets projects the gold mining sector will generate $60 billion in free cash flow in 2026. Against that backdrop, Barrick Gold’s recent surprise CEO change raised eyebrows — possibly linked to underperformance in shareholder returns amid a sector-wide “stock price race.”

BlackRock argues that with strong margins now secured, company leaders must prioritize returning capital to shareholders who endured years of underperformance.

The firm recommends:

• Prioritize dividends over share buybacks
• Offer the choice to receive payments in the form of a gold-backed ETF rather than just dollars or other currencies

There are growing fears that a wave of reckless mergers and acquisitions could undermine future growth. Recent deals — such as Anglo American’s pursuit of Teck Resources — appear driven more by the need to replace depleting reserves and scale operations than by efficiency gains or synergies.

Such transactions may offer short-term comfort but could dilute value if poorly executed.

Another red flag is executive compensation. Gold mining CEOs already earn more than peers in other mining sectors. There’s concern they may follow past patterns — rewarding themselves lavishly regardless of long-term strategy.

Marcelo Kim, Partner at Paulson & Co., once compared excessive mining executive pay to “sheep being led to the slaughter.”He said:

“I would hope no one gets crazy pay packages just because gold prices are up, because they have nothing to do with that.”