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After the close of trading last Thursday, Newmont Mining (NEM), the first senior gold producer to report quarterly financial results, released its results for Q3-2025. As expected, given the high average gold price and gold/oil ratio during the quarter, the results were extremely good and included record-high quarterly cash-flow. The company earned US$1.71/share during the quarter, which is US$6.84/share annualised. This means that despite this year’s large gain in its share price, NEM is being valued by the stock market at only about 12-times trailing earnings. We expect that it will be a similar story for most senior and mid-tier gold producers.

Further to comments in our lithium discussion earlier in today’s report, the fact that earnings are high and P/E ratios are low in the gold mining sector does not preclude the possibility that a long-term price top is forming. On the contrary, in the commodity realm, financial results and valuations tend to be most inviting near the ends of bull markets. However, the signs that normally are seen near the end of a gold-mining bull market are not currently evident. Before we get to that, the long-term underperformance of gold mining stocks relative to gold bullion is worth a brief revisit.

The main reason that gold mining stocks, as a group, underperform gold bullion over the long-term is that just as monetary inflation and the associated interest-rate manipulation promote malinvestment in the broad economy, they do the same in the gold mining sector. The difference is that booms in the gold mining sector generally coincide with busts in the broad economy, and vice versa.

As an aside, don’t be misled by the performances of equity indices such as the SPX into thinking that the US economy is in the boom phase of the economic cycle. Due to the domination of passive investing, the performance of the stock market now has very little to do with the performance of the broad economy. In the US economy over the past few years there have been booms in a small number of sectors, chief among them being AI and the related infrastructure, but the economy as a whole has been in the bust phase. Busts usually, but not always, culminate in a recession, with a surge in monetary inflation associated with the official response to the recession sowing the seeds of the next boom.

In the gold mining sector, the malinvestment that eventually stems from a boom involves ill-conceived acquisitions and project developments, the costs of which get written-off years later during the bust phase. The result is wealth destruction over the long-term.

A point we want to make today is that at this stage of the gold sector’s boom there are no signs of widespread malinvestment. On the contrary, NEM and other large-scale gold producers still appear to be more focussed on cost reduction and cash-flow maximisation than on growth, especially ‘growth at any price’. This suggests to us that the end of the boom phase is not imminent.

The end of the boom is not imminent, but the intermediate-term upward trend that began late last year is almost certainly over.

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