This year was always going to be a hard act to follow for gold-mining ETFs after a glittering 2025 of triple-digit returns. They’ve tumbled in the year to date, as investor infatuation with gold bullion took a sharp downward turn.
Gold began January in the US$4,300 range, and soared to a record high of more than US$5,500 before the month was over. It subsequently plunged to a little over US$4,000 in mid-July before rebounding to US$4,300 in early August.
Mining stocks, essentially a leveraged form of gold investing, lost even more in percentage terms in the year to date, as did ETFs and mutual funds investing in them.
What differentiates the two main types of gold ETFs — those that hold stocks and those that hold bullion — is how dependent their returns are on the price of the precious metal.
Returns of bullion ETFs are totally dependent on gains in the gold price. Not so for gold equity ETFs.
“The gold miners don’t need the gold price to keep going up in order to make money. At US$4,000 per ounce, they can make a lot of money,” said Chris McHaney, executive vice-president and head of investment management and strategy at Global X Investments Canada Inc.
The firm’s offerings include Global X Gold Producers Index ETF, which returned 176.9% in calendar 2025. It gave back only 9.9% in the first half of this year, but appropriately its risk rating is high. “Gold miners tend to have more volatility, but have more upside potential,” McHaney noted.
Despite the plunge in the bullion price from this year’s January peak, gold mining stocks are attractively priced, portfolio managers say. “They’re in a lower band of their historical valuation range,” said Robert Cohen, senior portfolio manager and head of the Dynamic metals and mining team that’s responsible for the Dynamic Active Global Gold ETF.
Historically, mining stocks have at times commanded much higher valuations. Nearly two decades ago, before the global financial crisis of 2008–2009, the mining stocks typically traded at a 70–80% premium of where they trade now, said Cohen.
“At the lowest, they were probably around 0.7 times [net asset value]. That’s well below where the sector has typically traded historically. Now they’re back up to around one times or so.”
In a scenario where the bullion price is in the US$4,000 range, Cohen added, miners can make “very decent” earnings, with profit margins of more than 50%.
Dynamic Active Global Gold, which returned 133.5% in 2025 before losing 14.7% in the first half of this year, holds a select portfolio of about 30 stocks, at different stages of the mining cycle.
The Dynamic ETF places some emphasis on exploration and development companies. As is the case with companies such as those held by the BMO Junior Gold Index ETF, smaller-cap gold stocks tend to be riskier but with higher growth potential.
“Get the rocks right”
“I always use the model, if you get the rocks right, you get the stocks right,” said Cohen. “So we’re doing a lot of ground-up work on these companies, really understanding the geology, the potential.”
Similarly, Ninepoint Gold & Precious Minerals Fund — for which an ETF series was launched in July 2025 — is looking to take advantage of potential small-cap outperformance in expectation of a rebound in the gold sector.
Recently about 46% of Ninepoint’s portfolio of about 75 stocks was in producers, with 17% in development companies and the remainder in exploration stocks.
“We like the small caps, because we think that this part of the market, from a valuation perspective, hasn’t really moved,” said Nawojka Wachowiak, senior portfolio manager responsible for Toronto-based Ninepoint Partners LP’s metals and mining funds. Given the negative sentiment of the market for gold equities, there’s “some extremely good value.”
Since the recent price plunge in bullion, valuations of gold equities as a whole have become cheaper, Wachowiak said. “The gold price went down, but the stocks went down even further.”
One metric cited by Wachowiak to illustrate the valuation trend is discounted cash flow in relation to the bullion price. Recently, these cash flows amounted to around 0.78 times the spot bullion price, down from the five-year average of about 0.9 times. The wider discount highlights how badly gold equities have been hit, she said.
Negative market sentiment
Dynamic’s Cohen and Ninepoint’s Wachowiak both cite negative market sentiment as a factor weighing on the gold sector. ”Sentiment is moving in and out of the gold price,” said Cohen. “It can move in and out in the same week.”
Wachowiak said some clarity from the U.S. Federal Reserve on interest-rate policy and its stance on the economic environment “is what’s needed for investors to start getting more comfortable and to step back into the gold space.”
In the meantime, investors are bargain hunting and starting to think that “gold stocks are trading on such low valuations that buying the equities as insurance or as a hedge comes at a very cheap price.”
While gold stocks provide diversification benefits because of their low correlation with other equity sectors, investors need to have a long-term focus, said Global X’s McHaney.
By comparison, gold bullion itself is more defensive in nature. “This is for someone who wants, I would say, a true diversifier to their equity portfolio,” McHaney said. That’s because bullion has a low correlation to equities in general.
Gold bullion ETFs have different approaches, with the most common being pure plays on the current price. This group includes BMO Gold Bullion ETF, CI Gold Bullion ETF, the futures-based Global X Gold ETF, iShares Gold Bullion ETF, Ninepoint Gold Bullion Fund and Purpose Gold Bullion Fund.
Other variations on the gold investing theme involve the use of covered calls, such as those employed in stock portfolios by CI Gold+ Giants Covered Call ETF and Global X Gold Producer Equity Covered Call ETF.
McHaney said Global X’s covered-call strategy is designed to deliver two-thirds of the full upside potential of the stocks, while providing monthly income.
The Global X Enhanced Gold Producer Equity Covered Call ETF — which maintains a leverage ratio of about 125% — is a higher-risk income generator, but with more growth potential.
“We see lots of different approaches to investing in this space,” said McHaney, “and obviously want to have all the tools out there for investors to utilize.”