Gold miners are dramatically outpacing chip stocks, with the MSCI global gold miners index up 43% in August, according to Bloomberg.
The mining rally accelerated after the US Treasury unexpectedly expanded bond buybacks, pushing down borrowing costs and reviving the “debasement trade” – the view that weakening purchasing power in currencies such as the dollar will increase demand for alternative stores of value.
Gold has climbed 13% this month to above $4,500 an ounce.
That surge is particularly powerful for miners, whose earnings can rise faster than bullion prices as higher gold prices expand margins. Bullion-backed ETF holdings tracked by Bloomberg have recorded their strongest increase since September, while central-bank buying, constrained supply and portfolio diversification are reinforcing the longer-term investment case.
Large-cap miners are among the beneficiaries. Zijin Mining has gained 14% this month even as the Hang Seng Index declined 1%. JPMorgan’s Matthew See favours larger producers and sees scope for platinum and other precious metals to participate as the cycle strengthens.
The contrast with technology is striking. Major semiconductor benchmarks recorded their best month in April, when MSCI’s world semiconductor gauge rose 27% and the Philadelphia semiconductor index gained 38% – both below gold miners’ August advance.
For gold, investors are now watching Federal Reserve Chairman Kevin Warsh’s Jackson Hole remarks for the next signal on the debasement trade.
