Gold Is Skyrocketing: Is the World’s Largest Gold Mining Company Still a Buy After Soaring 40% in 2025?
Gold has a storied history, valued by humankind since ancient times and still regarded as a safe-haven asset in contemporary finance. With the recent volatility of the stock market, we have witnessed a significant surge in the price of gold. Over the past year, gold priced in U.S. dollars has jumped nearly 24%, while, when observed over a more extended period, it has gained an impressive 900% since 2000—a performance that far exceeds the S&P 500 index’s growth of 489% during that time frame.
In this thriving gold market, Newmont Corporation (NYSE: NEM), recognized as the world’s largest gold mining company, has seen its stock price soar over 40% year-to-date. As investors ponder whether to invest in Newmont Corporation now or if the opportunity has already passed, several key factors come into play.
Understanding the Investment in Gold Mining Stocks
Purchasing gold mining stocks like Newmont Corporation differs fundamentally from buying physical gold or a gold-backed ETF. When you invest in physical gold, you lay claim to real assets. In contrast, buying mining stocks gives you equity in the company’s reserves and the potential for future gold production still in the ground. Newmont not only produces gold but also engages in the extraction of copper, silver, zinc, and lead, making it a multifaceted player in the mining sector.
Newmont’s financial health and price performance hinge on two main elements: the volume of gold and other metals it produces and the prevailing market prices for these commodities. Understanding these components is essential for prospective investors, especially considering gold’s historical volatility.
The Boom-and-Bust Nature of Gold Investments
Investors gravitate towards gold for various reasons. A limited supply combined with its lasting value often makes gold a popular hedge against inflation. Additionally, during uncertain market conditions—such as those triggered by tariff announcements from the Trump Administration in early April—gold demand typically surges. Despite its long-term price increase, gold has a history characterized by cyclical booms and busts.
The price trajectory of gold reveals several peaks and troughs, particularly between the late 1970s and today. Even as the long-term trend points upwards, pricing consistency has been elusive. This trend is reflected in Newmont Corporation’s historical return of 240% since 1989, which indicates that merely holding onto this stock wouldn’t yield optimal results over time. The timing of purchase is crucial for investors considering Newmont.
Is the Gold Rush Nearing Its End?
As gold prices reach unprecedented heights, many investors and analysts are murmuring about the possibility of nearing a peak phase. Recent market signals, including a spike in the VIX index—which measures anticipated stock market volatility—heightened consumer anxiety reflected in the U.S. Index of Consumer Sentiment, and surging Google search interest in “how to invest in gold,” hint that fear levels are on the rise.
Gold stands as a hard asset. However, its value does not derive from a business model with earnings to support it; it is primarily influenced by market dynamics. This means that extreme fear in the market can coincide with a peak in short-term demand for gold—and thus, its prices may soon follow suit.
Evaluating Newmont Corporation’s Value
Despite the soaring prices, Newmont Corporation appears relatively inexpensive based on its current price-to-earnings ratio of approximately 15 times earnings. Interestingly, the company racked up a profit of $3.48 per share last year, benefiting from the rising prices of gold. Contrastingly, Newmont only earned $1.57 per share in 2023, showcasing the potential cyclicality of profits and the associated risks involved in investing.
It’s essential to acknowledge that cyclical stocks like Newmont often receive misleading evaluations when they experience peak earnings. Investors are often lulled into buying at what seems like a bargain price, only to find that, as gold prices taper off, so too will their earnings. This leaves potential buyers in a precarious position.
Conclusion: Timing is Crucial for Investing in Newmont
Given the rapid rise in both gold prices and Newmont’s stock value, it seems that investors may be closer to a potential bump than a bottom. With the current market conditions creating a climate rife with uncertainties, now may not be the ideal time to invest in Newmont Corporation. Those eyeing an entry point would be prudent to consider their strategies carefully, given the historical patterns of gold and its mining stocks.
Investing in Newmont Corporation or any gold-related assets is not merely a bet on the company but rather a reflection of broader economic sentiments and trends. As always, due diligence and market analysis should guide investment decisions.