Miners Experience a Renewed Gold Rush: Persistent Bullishness on GDX and GDXJ

Gold Prices Soar to Historic Highs Amid Geopolitical Uncertainties and Central Bank Demand

Gold prices have reached record highs, surpassing the $3,500 per ounce mark in 2025. The continued rise in gold prices is driven by significant geopolitical uncertainties, a weakening US dollar, active central bank gold purchases, and inflationary pressures in emerging markets.

The ongoing global conflicts and escalating trade tensions, such as the Israel-Iran conflict and US-China trade tensions, have fueled safe-haven demand for gold. Central banks, including those in China, India, and Russia, have been actively purchasing gold to diversify reserves amid dollar instability and sanctions.

This increased demand, combined with the weakening US dollar, has pushed gold prices to historic highs. Additionally, inflationary pressures in emerging markets reinforce gold's appeal as an inflation hedge. Renewed ETF inflows, particularly in Asia, and increased investment demand also support the rise in gold prices.

Gold Miners Poised for Outperformance

Gold miners, as represented by the VanEck Gold Miners ETF (GDX) and the VanEck Junior Gold Miners ETF (GDXJ), are positioned to outperform gold due to undervaluation, operational leverage, and strong sector fundamentals.

Despite record profits amid high gold prices, many mid-tier and junior miners trade at relatively low price-to-earnings ratios, indicating that the market has not fully priced in the sustainability of current gold prices. This provides substantial upside potential for mining equities.

Gold mining companies have earnings that rise disproportionately compared to gold prices, granting them operational leverage. This means that gains in gold price translate into amplified profits for miners. GDX and especially GDXJ (junior miners) often lead physical gold movements because of this sensitivity.

Central banks made net purchases of 123 tons of gold over the first half of 2025, with Poland adding 67 tonnes to its reserves. The anticipated shift in monetary policy, including interest rate cuts by the Federal Reserve and other central banks, increases the appeal of gold.

Investment Considerations

Both GDX and GDXJ now trade at a historical P/E ratio of 18.3 for GDX and 19.0 for GDXJ. Balance sheets of gold miners have strengthened significantly, with many producers now approaching net-cash positions. However, operational costs remain a persistent headwind for gold mining.

Investors should consider that mid-tier producers offer superior risk-adjusted returns over major miners, while GDX and GDXJ provide diversified exposure with varying volatility. It's common for investors to balance allocations between broad ETFs and select individual miners for enhanced returns.

Performance and Top Holdings

The VanEck Gold Miners ETF (NYSEARCA:GDX) has jumped nearly 70% this year, with its junior equivalent, the VanEck Junior Gold Miners ETF (NYSEARCA:GDXJ), up 69%. The GDX tracks the NYSE Arca Gold Miners Index, with major gold miners Newmont (NEM), Barrick Mining (B), Agnico Eagle, Wheaton Precious Metals (WPM), and Franco-Nevada (FNV) among its top holdings.

The VanEck Junior Gold Miners ETF (GDXJ) tracks the MVIS Global Junior Gold Miners Index, with Pan American Silver (PAAS), Alamos Gold (AGI), Harmony Gold (HMY), B2Gold (BTG), and Evolution Mining (OTCPK:CAHPF) among its top holdings. GDX and GDXJ have a total expense ratio of 0.51%.

In the first quarter of 2025, Agnico Eagle's AISC and gold production saw little change, but net income more than doubled due to the 40.2% increase in the gold price.

Cautions and Resistance

Some technical analysts caution that gold and GDX may face resistance of previous highs and possible short-term pullbacks, influenced by currency strength and tariff stabilization. However, many believe that the fundamentals of the gold market and the operational leverage of gold miners will continue to drive strong performance for these assets in the long term.

[1] The Wall Street Journal

[2] CNBC

[3] Bloomberg

[4] Barron's

[5] Reuters