The views expressed in this article are those of the author and do not necessarily reflect the views of Mining.com.au, its affiliates or the companies Hedley Widdup is associated with.
Following sustained performance over recent years, gold has silently become one of the best performing asset classes on global markets. It has torn away in 2025, far outperforming the all-powerful S&P 500 – since 1 January 2025. Gold is up 55%, where the S&P 500 has wavered between being down by more than 15% (April 2025) to now being up 12.5% year-to-date.
This is the thing about gold – for most investors, it comes from nowhere. And where it is going is just as puzzling.
It is impossible to describe what motivates buyers of gold now without recapping the way that gold fundamentals have varied as it has been freely tradable. I started my career in mining investment, having worked as a geologist before that, just over 18 years ago.
For that whole time, I have struggled to piece together a coherent summary of the factors that have played a part in gold’s performance over time. It is far from a treasure map and is a product of looking at and listening to many other people’s works over years. I’ve written it down hoping in equal parts to make some sense of it myself, as well as hopefully for others.
Gold price: Decades in the making
Gold has a unique place in the investment market. In gold bull markets, it can be the best performing asset globally – and in between times the preserve of tin foil hat conspiracists. Even though gold has been performing well since 2018, the performance of gold in 2025 has suddenly brought it to the attention of many investors who don’t ordinarily hold or invest in gold.
The gold price was “floated” in 1971 – prior to this the gold price had been fixed in US dollar terms. Since then, the investment market’s relationship with gold has been dynamic, and rocked by geopolitics and economics. Books have been written about this complex history.
Gold is an unusual commodity in that it is more hoarded than consumed, and whilst vast unused stores of gold exist trading tends to be far more of recently produced metal than wholesale movement of long stored metal.
Buyers tend to be motivated by ownership rather than price and this sets gold aside – the purchasers of all other commodities need to pass the acquisition price of the commodity on to end users, and this creates price caps in all other commodity prices other than gold.
1970s: Conflict, inflation, and declining gold production
The Cold War extended from the end of World War II until the early 1990s. During the Cold War, global economics and trade were heavily influenced by conflict and Central Banks needed to own gold against a backdrop of currency volatility and political uncertainty. They were net buyers through much of the duration of this period of conflict that threatened, but never devolved into, a hot war between superpowers and the persistent spectre of nuclear weapons.
The 1970s saw economic turmoil with two episodes of runaway inflation tied to dramatic oil price rises – from a long-term prevailing price of up to around US$3/barrel, to over ten times that figure. Oil price is a commodity fluctuation the whole world feels, and in times where inflation is severe gold becomes a hedge against the loss of purchasing power of currencies.
Some people take the view that the decision to remove the gold backing of the US dollar dramatically affected the way oil sellers saw the value of the US dollars that were used to pay for their oil.
Whatever the motivation, Middle Eastern oil shifted from being produced and sold predominantly by western companies for low prices, to predominantly Middle Eastern agencies for prices that better suited them. This shift took place in a short period of time; and the OPEC cartel was born.
The 1970s was also the end of South African domination of global gold production. Its mantle was lost not to a competing ascendant producer but because of a rapid decline in South Africa’s production, which fairly significantly reduced overall global gold production.
Gold production v. gold price
So the factors that underpinned the gold bull market of the 1970s and into the early 80s included steady demand for gold from Central banks, massive inflation which was a significant motivator of investor gold purchases, and declining supply to feed that appetite. A perfect supply-demand squeeze.
1990s: Harmony and hedging
The need for Central Banks to hold gold diminished, and many reduced or exited their gold positions – selling hundreds of tonnes of gold, which ultimately led to a pact between Central Banks to limit their annual selling because of the extent to which it was impacting gold price.
When the Cold War ended it led to over a decade of prosperity, especially in the west. This was a period of accelerating globalisation, streamlining commodity markets and peak US dollar confidence.
The gold mining industry had also encountered two massive new transformative fundamentals.
The first was the advent of Carbon in Pulp / Carbon in Leach (CIP/CIL) processing which enabled economic processing of much lower head grades and ushered new efficiency into gold production – material that had been wasted in the 70s quickly became economic, even at a lower gold price.
As a result global gold production surged – increasing by 2.3 times in less than twenty years (1980-2000).
The second was a financial opportunity – through roughly the same period, gold producers could access gold price above spot by selling forward – which employed the use of derivative products (‘forwards’) of varying complexity and duration, which basically applied an interest rate linked inflation on gold price to be received for future delivery of gold.
Through an era where inflation was never really under control, this provided strong forward pricing (“contango”) and the industry sold forward enthusiastically – piling on gold sales that were promised from future production, on top of expanding actual production.
Expanding industry supply, aggressive selling that exceeded production by the industry on top of Central Bank selling all roughly overlapped and subdued the gold price through most of the 80’s and 90’s.
The 00’s – one gold bull market, or two in a row?
The global industry had accumulated a hedge book of complex forward sales that accounted for over an entire year’s production by the late 1990s.
The global financial market’s sentiment toward derivatives changed dramatically in 2001 as a result of the Enron scandal, which brought about the start of investors beginning to question gold hedge books – some being so complex the companies themselves didn’t understand the range of obligations and risks.
There were notable company implosions, and a strong need arose for the gold industry to neutralise its hedges. Throughout the 2000’s, gold companies raised money by issuing equity to buy out their hedges – leading to the perverse situation of the gold industry becoming (perhaps) the biggest buyer of gold in the market.
De-hedging undoubtedly underpinned the steady commencement of a gold bull market, against a backdrop of flat to weakening global gold production. The ability to expand gold production was challenged by a commodity boom in all other commodities (the rise of China) that was rapidly inflating operating costs.
The gold bull market of the 00s also saw gold ownership become far more accessible with the advent of gold exchange traded funds (ETFs), which became a large source of buying in the decade that followed their 2002 inauguration.
Enron was not the only turning point of 2001 for gold. The September 11th terrorist attacks on the United States changed the course of global conflict, ending the short but relatively hostility-free post-Cold War period, and giving way to rising conflict that drew the US back into hostilities in the Middle East.
The global financial crisis (GFC) looks like a blip in the gold price, roughly mid-way in a clear gold bull market that lasted until 2012, but this too was a turning point.
The response of western governments and central banks to the market meltdown was a large volume stimulus that exceeded simply lowering interest rates – to underpin market confidence and protect institutions that were (for the first time) “too big to fail”.
“Too big too fail”
This was a huge change – economic hardship in the past had led to periods of austerity, which is in many ways a market mechanism that resets the factors that caused the economic problem in the first place.
But under stimulus, austerity is avoided – turns out this is also far more politically palatable for electable officials. The turning point for gold was for Central Bank buying – which suddenly took off and has been maintained at a steady annual rate since.
All of a sudden, Central Banks were buyers of gold again but this time buyers were dominated by BRIC nation central banks (from nations where austerity is their principal management of economic crisis) – after much of the world lost confidence in the west’s willingness to tolerate austerity, opting instead for stimulus.
Economic stimulus results in excess currency production, which conventionally leads to inflation and currency debasement.
BRIC central banks bought heavily as gold price weakened in 2011 and have carried this through, even as gold price began to rise again, as they pursued diversity for US dollars in their foreign exchange reserves.
China has become a wealthy nation after decades of economic growth – its appetite for gold in the 1970s may be a moot point, as China’s central bank probably had different priorities at that stage.
China has been a significant player in global central bank gold buying volumes since prior to the GFC, having also been a significant purchaser of US Treasuries.
Commentators love to break down China’s gold interest, because their overall gold holding as a portion of foreign reserves is low (compared with global averages). But China is also noted as a nation that “treads its own path”.
One thing for certain is that China’s economic emergence post 2000 has created a new and significantly higher paradigm for all mineral commodities so the supposition that the importance of achieving the desired level of ownership transcends price is easily transferable to gold. Time will tell.
Gold sector de-hedging is totally unrelated to BRIC nation central bank gold buying, but one powerful driver gave way to the other in driving the gold bull market of 2000-2012, almost as if two bull markets had been seamlessly joined by the global financial crisis.
2012-2018: Departure of the generalist investors
The end of the 00’s gold bull market was 2012. A dramatic fall saw aggressive selling that had all the appearance of a loss of market interest in gold.
In the aftermath of the global financial crisis, stimulus was flowing directly into the equity market which went on to accumulate an eye watering capitalisation driven by (now) huge technology companies.
Gold can flourish in the market when it is seen as having strong drivers, this entices buyers, and those buyers cause it to outperform other markets – this attracts more and more generalist holders and underpins long bull markets.
Gold bull markets tend to finish when other assets become attractive to buy, in part financed by selling gold which has appreciated strongly, and a stimulus powered market for tech equities is where generalist money went.
In 2012, gold’s purpose to many investors had expired and they switched focus to a new fast-growing fascination.
Gold production was expanding fairly rapidly by 2012 giving supply every chance of overcoming demand, which is probably an important factor. The gold price didn’t meaningfully recover until gold production flattened, in 2018.
Which leads us to this bull market: De-globalisation, de-dollarisation, inflation and conflict
Conflict in the world is not global but has accumulated between several theatres in the last decade.
Deglobalisation, which accelerated under the administrations of Trump presidencies, has stoked a sense of tension between the US and China, and most recently introduced the concept of “strategic” materials.
As much as these are strategic to the buyers, what this means is the west can no longer obtain these materials in the volumes they desire from China – strategic production and stockpiling will result, which is a by-product of what is taking on an appearance of a new Cold War.
Middle Eastern tensions have simmered consistently since 2001, and hot wars stemming from Russia invading Ukraine and tension between Israel and its neighbours have escalated since 2022.
There is an ongoing concern too around sabre rattling by China in the Pacific, in particular around its intentions toward Taiwan.
Against this backdrop, it is possible once again to say “Central Banks need to hold gold”, although we shouldn’t forget the conflict portion of this motivation is probably far more recent than Central Banks from BRIC nations buying gold as a result of Western nations propensity for economic stimulus.
The result of the Russian invasion of Ukraine had key economic ramifications. This conflict led to sanctions on Russia, a commodity producer of significance, which interrupted already deteriorating global trade.
This drew many commodity prices, which had been inflated by covid era stimulus, to their ultimate peaks, as the impact of conflict related tension swept through the global economy.
More significantly for gold, the US imposed new restrictions via the US dollar system – in its simplest form, if you were an ally of Putin, the US could confiscate your assets and the easiest of those were US dollars in western accounts.
To say this may have affected capital allocations by oligarchs and even nations may be an understatement!
Many allies of the US now have in the back of their minds that a portion of their national savings or even foreign exchange holdings, which are US dollar / treasury dominated, have suddenly taken on a new dimension of risk especially if they were to ever come into serious disagreement with the US.
The Russian invasion of Ukraine sits at an inflection point for gold; the price accelerated in the aftermath.
The concept that the current gold bull market is underpinned by de-dollarisation intersects many of these themes: a rapidly diminishing confidence in the US dollar system by BRIC nations, the ‘confiscatability’ of US dollars under sanctions – these are new motivators even if they are really just the beginning of the reversal of US hegemony.
It is always risky to say “it’s different this time” so this has to be acknowledged – we’ve also never seen the demise of US dollar hegemony before. These factors are amplified by conflict, which is itself partly related to deglobalisation, and part echo of the past.
Annual gold supply has remained flat since 2018. New supply growth remains restricted by industry discipline (which history suggests will be hard to maintain indefinitely) and reserve growth – which has been little different for gold as in other commodities, which have seen an under investment in sources of new supply.
Western market interest in the current gold bull market has been weak – limited to volatile gold ETFs – held back by the ongoing equity market fascination with technology behemoths and evidenced by the muted transmission of gold price to gold equity prices.
Many gold miners still trade on undemanding earnings premia, whereas in previous gold bull markets gold equities saw far greater willingness for investors to price high future prices via equity premia to earnings.
Bull markets are built by more and more participants joining over time, and only a low proportion of investors in the west are participating yet.
Gold price: 1960-present comparing key drivers of bull markets
Gold price has increased dramatically during 2025, with an aggressive rise of over US$1,000/oz between August and October, reaching an all-time high close of US$4,356/oz on 20 October.
During this upswing, gold reached 33% above its 200-day moving average, such a significant deviation historically has caused profit taking to occur and this time was no exception.
The gold price moved back towards US$4000/oz with gold miners and explorers following the trend.
Gold is notoriously challenging to predict. Some people even think that when they utter a prediction, a powerful jinx could be activated.
So rather than using numbers, let’s just look at the key questions that play into the near-term future for gold.
Supply remains restricted. This is a positive for gold. When supply expands it can (and has in the past) coincided with the ending of bull markets, possibly because it flips a tight balance between supply and demand
Central bank buying. Have Central Banks driven the gold price? Or just provided tightness in the market that enabled other marginal buyers to make the difference?
BRIC nation central bank buying didn’t just start when gold began to run hard in August and the media sat up to take notice. It started in roughly 2008, and the de-dollarisation theme looks like a long-term theme. Whilst the US economy looks loaded with fiscal largesse, the theme probably remains pretty robust.
Investors and speculators move prices. This is true of all markets, especially where buying and selling is easy – and gold has become progressively easier to buy and sell with the proliferation of ETFs.
Gold is easier to store than say oil, but to the sophisticated “ma or pa” investor, the ETF transcends storage concerns. Oil now looks very cheap in comparison to gold, but general equities (eg – tech stocks) still look expensive. This is bound to influence capital flows.
The fundamentals that have underpinned the current gold bull market which commenced in 2018 but took off in earnest after 2022 all remain in place. De-dollarisation / de-globalisation appear to be long term themes and conflict an unfortunate but probable side effect.
Steep rises like we have seen in 2025 are unlikely so they shouldn’t be the template that sets expectations, but the case for ongoing gold robustness appears far more likely than gold rolling over.
There remains a strong case for rotation of investor capital from highly priced equities, especially tech, toward commodities generally, which is a theme that gold would be expected to continue to benefit from.
Gold equities?
Gold equities used to be the only way for swinging investors to play gold. ETFs have provided an alternative and diluted that, but only to a degree.
As the gold price has performed, so gold producers have traded positively with the gold price, and for most if not all the boon to their revenue line has fed through to strong earnings and cash growth.
But gold explorers and gold project developers – the companies that hope to become miners – will tell you it’s not been that easy.
Where their producing contemporaries began to feel the glow of gold in 2022, it wasn’t until late 2024, or 2025 in earnest, that the equity prices for explorers and developers began to move – and that was stock specific rather than moving the whole sector.
When the gold price moved back towards US$4000/oz, gold miners and explorers followed that trend and many gold developers and explorers were fairly aggressively sold off.
To many investors holding diverse portfolios that include some gold juniors this was probably quite an evident pull back – and because sharp price falls often mean there has been a problem in a company, it has led many investors to question the outlook for their (especially junior) gold holdings.
Despite the strong pull back, much of the spectrum of gold companies – explorers and producers alike – are now collectively in a much better position than they were earlier this year.
Most have taken advantage of the momentum in the sector, raised cash – in greater quantities than they could any time in the last five or more years – and are now much more strongly funded.
Due to this their activity has picked up, with it their chances of generating positive news, and the current market is far more welcoming of good news so tends to provide a reward by way of share price improvement.
The current AUD gold price over $6,000/oz provides an outstanding operating margin for most current producers, many of which have All In Sustaining Costs mostly up to circa $3,000/oz.
Gold producers have piled up earnings, and this constitutes a war chest that is likely to be deployed on growth.
And the prospective economics for developers under these cost / gold price circumstances are better than they have ever seen, so the aspiration to become a producer is never stronger.
So, despite the pull back in the gold price and associated gold equity volatility, the gold sector is in better and better shape and on the basis of prevailing costs and gold prices current prospective economics for developers look exceptional.
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Source: Gold Price: IRESS data, Gold Production: World Gold Council
