Gold is once again in the lead this year – and according to Sprott, the strength of the movement extends beyond short-term fluctuations. While the S&P 500 is lagging, gold and gold mining stocks have outperformed not only in 2025, but also over three, five, and ten years. Remarkably, this development occurred with comparatively subdued investor participation. In a recent assessment, Sprott portfolio manager John Hathaway argues that despite significant price gains, the asset class remains moderately valued and gold could once again take a firm place in strategic allocations – similar to the 1960s and 1970s.
Gold as a Building Block for Risk Diversification
Hathaway points out that gold is now closely linked to the topic of risk diversification. Short-term pullbacks after the recent strength are likely, but should be understood as normal market breathing. For the strategic perspective, he considers a fixed gold component in the portfolio to be sensible. Among other things, he quotes Morgan Stanley CIO Mike Wilson, who questions the traditional 60/40 model (equities/bonds) and instead proposes a 60/20/20 split: 60% equities, 20% bonds, 20% gold. Similar considerations are also coming from other sources: An analysis by Goldman Sachs at the beginning of the year discussed replacing part of the bond allocation with gold in order to improve the earnings prospects over a five-year period.
From Sprott’s point of view, this is less of a tactical bet and more of a structural adjustment to an environment in which classic hedging components such as government bonds do not unfold their protective effect in every cycle. Gold as a real asset, whose correlations can differ from stocks and bonds, moves into the foreground as a diversifier in such phases.
Gold Mining Stocks: Strong Performance, Low Weighting
A focus of the analysis is on gold-related stocks. According to Sprott, gold mines have increased by more than 122% in the nine months to September 30 – compared to around 47% for physical gold (bullion) and around 14% in the S&P 500. Nevertheless, Hathaway speaks of “moderate” valuations. His reasoning: Capital allocations to the sector are still subdued, the largest industry benchmark, the VanEck Gold Miners ETF (GDX), has recorded net outflows in the outstanding shares over the past two years.
Another finding fits in with this: According to Sprott, the market capitalization of gold mines currently amounts to around USD 550 billion – which corresponds to only about 0.43% of global stock market values. Overall, mining stocks (to which gold producers only contribute a part) thus represent the smallest share of global market capitalization since 1900. These are indications of a still low sector anchoring in standard portfolios. However, Hathaway indicates that the perception is changing: Momentum stocks could emerge from a long-avoided niche, provided the positive gold price trend continues. An assessment of this thesis remains reserved for market development.
Silver in Catch-Up Mode
In addition to gold, Sprott is also focusing on silver. The metal lagged behind for long stretches of the past decade, but has shown stronger performance than gold since the beginning of the year. Hathaway refers to years of supply deficits that have led to a tense market. In this context, the relation between the two precious metals is interesting: With a gold-to-silver ratio of around 83, the value is still significantly above the long-term average of around 67. Historically, part of such deviations was later reduced again – an indication of potential catch-up potential for silver if the superordinate precious metal cycle continues.
For the equity side, this means: Should silver mark new highs – as a reaction to the increased gold price – silver producers could also return to their long-term valuation averages and catch up with gold producers. These considerations tie in with patterns that have been observed in later phases of earlier precious metal bull cycles. Whether and to what extent such scenarios will materialize depends as always on framework conditions – such as the development of interest rates, inflation, the dollar and industry-driven silver demand.
In our view, three aspects can be derived from the Sprott analysis. First, gold is not only asserting itself tactically, but also over several time windows compared to the broad stock market. Secondly, mining stocks show a leverage effect on the gold price over cycles, which increases both opportunities and risks. Thirdly, the low sector weighting in the global equity universe and outflows from benchmarks such as GDX suggest that the recent rally has so far taken place without broad inflows – and that potential should therefore continue to exist.
Conclusion: Gold remains in focus. The combination of multi-year outperformance, continued moderate sector valuation and structural diversification arguments shapes the current discourse. Whether mining stocks, gold and silver will continue their run will be shown by the development of the coming quarters.
