MW Gold and gold miners suffered a big one-day retreat. Why it's still not time to sell.

By Myra P. Saefong and Tomi Kilgore

Gold miner ETF set a record streak of being overbought, but that can actually be a sign of underlying strength for the longer term

Gold miners have outpaced the performance of gold so far this year.

Gold took a hit on Thursday, and shares of gold miners tumbled along with it, as some investors booked profits after the metal's more than 50% climb so far this year.

As well as gold (GC00) (GCZ25) has performed in 2025, shares of gold miners have booked even bigger gains. The miners' inability to move alongside gold at the end of last year might have frustrated some investor, but that changed suddenly as the year started, as the miners have more than doubled gold's gain since then. But according to strategists, there is a relatively simple explanation.

"Gold producers have operating leverage," said David Russell, global head of market strategy at TradeStation. "Profits rise faster than bullion once prices clear breakevens." The breakeven price for gold companies, or average all-in sustaining cost, was estimated at $1,600 an ounce by VanEck in a report from June.

Analysts have cited a few reasons for the disconnect.

"The price of gold is just one input of many into a mining company's ability to extract gold profitably from the ground," said Peter Grant, vice president and senior metals strategist at Zaner Metals. There are rising production costs and operational risks to consider, and expanding a mine's capacity is very capital intensive - and often faces environmental and regulatory hurdles that result in significant and costly delays.

That's why mining stocks have historically lagged the price of gold, he noted.

Gold miners' rise

Last year, gold miners underperformed relative to gold. That created a "catch-up that has largely played out in 2025," said Ryan McIntyre, senior portfolio manager at Sprott Asset Management. And "there's still room for further outperformance as equities continue to align with the rise in gold prices."

Despite the price strength, investor sentiment and participation in gold-mining equities remains muted, McIntyre told MarketWatch, pointing to a 21% decline in the number of shares outstanding for the VanEck Gold Miners ETF GDX this year. The number of ETF shares outstanding can fluctuate depending on investor demand.

"This suggests there is still a lot of room for improvement in demand for shares of gold-mining companies, which now enjoy strong margins and have maintained disciplined capital allocation," McIntyre said.

Read: Why gold's surge shows it's more than just a hedge for the stock market's record run

Gains in the VanEck Gold Miners ETF, which offers exposure to the overall performance of companies involved in the gold-mining industry, have outpaced the physical gold-backed SPDR Gold Shares ETF GLD since the beginning of the year, according to Dow Jones Market Data. Year to date through Thursday, the GLD fund has climbed 50.9% while the GDX fund has gained 123%.

Before this year, GDX had only outperformed GLD in 2009, 2016 and 2019, based on annual performance data going back 2005.

"Even after the torrid runs they've had so far this year, the gold miners are generally considered to still be undervalued on price-to-earnings bases because their earnings have risen much more quickly than their prices," said Brien Lundin, editor of Gold Newsletter.

With gold at $4,000 an ounce, "there isn't a mine in the world that isn't robustly profitable," he told MarketWatch. "And the market has yet to fully rerate company valuations in relation to those earnings."

A chart of the VanEck Gold Miners ETF/gold ratio. When the line is rising, the miners are outperforming gold, noted Gold Newsletter's Brien Lundin.

"At some point, that valuation gap will close, and yet the market will look ahead and begin to factor in even higher gold prices," Lundin said. However, "it's far from that stage yet."

Much of the buying during this gold bull market has been driven by central banks, which make their purchases for "strategic and tactical reasons," he noted, so the market corrections "haven't been to the depth or duration that technical analysis would predict."

Overbought conditions

Data on the gold-backed SPDR Gold Shares ETF and VanEck Gold Miners ETF have both shown signs of overbought conditions.

GDX's pullback on Thursday, which took it toward its lowest close for the month, may be raising worries among bulls that being so overbought for so long is finally having an effect, and may be a warning that the gold rally is near an end.

The fund's relative strength index $(RSI)$, a widely followed underlying momentum indicator, recently reached the highest level seen in six years. It also snapped on Thursday a 31-session streak of being in overbought territory, which easily broke the previous record of 12 straight sessions seen in June 2019.

Many chart watchers view RSI readings at or above 70 as signaling an overbought condition, which suggests that a stock or index has run up so much, relative to its historical behavior, that it needs to take a breather. But in reality, that's often not the case.

See: Super Micro's stock is its most overbought in a year. Here's why that's bullish.

There's a saying on Wall Street that overbought doesn't mean over, because many see it as more of an ability than a condition. The idea is that the ability to become overbought is actually a sign of underlying strength.

For the GLD, RSI has been above 70 for 27 of the past 28 sessions, closing Thursday at 72.97. On Wednesday, RSI closed at 86.31, the highest reading seen since August 2020.

Considering what gold itself has done - repeatedly reaching record highs during the year so far - the fact that miners have performed much better than the metal is quite impressive, said Gold Newsletter's Lundin.

Still, despite the performance of miner shares, the GDX ETF has experienced significant outflows in recent months, he noted. Some interpret this to mean that investors are still largely on the sidelines, Lundin said, adding that he agrees with that "to some extent."

However, he also believes the "commensurate steep gains in the share prices of the component stocks in that ETF show that many investors are participating" - but doing so through individual companies rather than the ETF.

For example, the RSI for gold miner Newmont Corp.'s stock $(NEM)$ also had a 31-session streak in overbought territory, that ended Thursday.

"That's encouraging, as it shows much more active interest building in the sector," said Lundin.

-Myra P. Saefong -Tomi Kilgore

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October 10, 2025 07:02 ET (11:02 GMT)

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