According to UBS's recent research report, gold has become a “consensus long position” in the market by early 2025. After gold prices have risen approximately 60% this year (setting around 40 new highs in 2025), the market is starting to seek second and third layer derivatives of gold, such as silver, platinum metals, and mining stocks, to achieve higher leverage, with investor interest reaching extremely high levels. However, the bank is increasingly cautious about the growing short-term enthusiasm in gold trading. Traditional indicators, such as COMEX net long positions and ETF capital inflows, have not yet shown signs of extreme crowding, indicating that gold purchases still have a broad base.
Despite strong momentum and some degree of positioning “crowding,” UBS does not see the conditions for a sustained downward cycle in gold. The bank believes that the logic behind central banks' continued purchases of gold remains valid. Although most gold pricing models are currently “broken,” their strategy indicates that the five bear markets in gold over the past 50 years have occurred under the following conditions: a strong dollar, declining inflation or its expectations, rising economic growth, and reduced risk premiums/uncertainty. Looking forward to the next 6 to 12 months, the bank anticipates that these factors will exhibit opposing trends, believing that the persistent themes of “de-dollarization” and “currency depreciation” will support demand for gold asset allocation.
After years of underperformance, gold stocks (GDX index) have shown strong results in 2025, rising over 100% this year and outperforming gold by about 70%. Compared to the cyclical lows from Q4 2024 to Q1 2025, the market has already corrected the EV/EBITDA, spot EV/EBITDA, and P/NPV valuation multiples for gold stocks for the next 12 months. In the view of UBS, the risk-reward profile for gold stocks is currently less attractive than it was at the beginning of 2025. However, it is still too early to assert that the gold mining stock cycle has peaked.
Current market expectations remain positive (based on a gold price assumption of $4,100 per ounce, EBITDA for 2026 to 2027 has been revised up by about 20%). Valuations are generally moderate compared to the average levels over the past 5 to 10 years, operational performance and reliability are improving, with most individual stocks generating record free cash flow. The financial health of the balance sheets is sound, with most large mining companies demonstrating capital discipline, enhancing cash returns, and cautiously managing capital expenditures and mergers. UBS states that if gold miners can continue to rebuild investor confidence and trust, it expects that earnings estimates will sustain upward momentum and provide further valuation expansion opportunities for some individual stocks. Gold stocks are currently priced below the spot gold price (approximately $4,150 per ounce). The bank notes that international gold mining stocks are not currently overvalued, and the earnings momentum remains positive.