In 2025, the gold market experienced a remarkable resurgence, with prices escalating by 65%, marking its most significant rally in nearly half a century. This robust performance has naturally led investors to ponder the sustainability of this upward trend for the precious metal.
The VanEck Gold Miners ETF (GDX) emerged as a standout performer in 2025, delivering an extraordinary 153% return. This surge not only dwarfed the gains of physical gold but also underscored the inherent leverage that gold mining companies offer in a rising gold price environment. GDX provides investors with a diversified portfolio of major global gold mining firms, mitigating the single-stock risk while capitalizing on the broader industry's momentum.
Despite its impressive track record, GDX appears to be trading below its intrinsic value. With a price-to-earnings (P/E) ratio of 24x and a price-to-book (P/B) ratio of 3.55x, it presents a compelling valuation compared to the broader market, as exemplified by the S&P 500, which trades at a P/E of 30x and a P/B of 5.25x. This relative undervaluation, coupled with strong earnings growth from its top constituents such as Newmont (NEM), Agnico Eagle Mines (AEM), and Barrick Gold (B), suggests significant upside potential.
A deeper dive into the operational landscape reveals that major gold miners within the GDX portfolio are enjoying unprecedented financial health. They are currently generating record levels of free cash flow, driven by expanding profit margins. This favorable environment is largely attributable to the fact that gold prices have surged well beyond their all-in sustaining costs (AISC). Many miners have successfully kept their AISC stable, hovering around $1,600 per ounce, while gold prices have climbed above $2,500 per ounce. This substantial differential translates into robust profitability and allows these companies to strengthen their balance sheets and return capital to shareholders.
The current macroeconomic backdrop further supports a bullish outlook for gold and, consequently, gold miners. Persistent inflation concerns, geopolitical uncertainties, and a global search for safe-haven assets are expected to continue driving demand for gold. Concurrently, the supply of newly mined gold remains constrained, a factor that is likely to keep prices elevated. Given these enduring tailwinds, the risk-adjusted profile of GDX remains highly attractive.
Considering the sustained positive fundamentals for gold, the strong financial performance of mining companies, and the favorable risk-reward dynamics, GDX represents a promising investment opportunity.