Gold mining stocks, as tracked by the VanEck Gold Miners ETF (NYSE:GDX), are enjoying a stellar rally, rising 4.3% by 11 a.m. ET, on track for its largest one-day gain since early March.

The rally in miners was driven by a surge in gold prices, which jumped 1.6% to reach an all-time high of over $2,550 per ounce on Thursday, fueled by economic data and central bank interest rate decisions.

In the U.S., the latest producer inflation report for August showed mixed results. Both the headline and core Producer Price Index (PPI) exceeded monthly expectations, but on an annual basis, they fell short.

The European Central Bank (ECB) reduced its deposit facility rate by 25 basis points, bringing it to 3.5%. The ECB noted it is "appropriate to take another step in moderating the degree of monetary policy restriction."

This move has increased demand for gold as a safe-haven asset amid lower interest rates in Europe and expectations for a similar 25-basis-point drop in the U.S. fed funds rate next week.

Analyst Takeaways

Otavio Costa, macro strategist at Crescat Capital, highlighted that Barrick Gold Corp. (NYSE:GOLD), the second-largest gold miner globally, has reported its lowest annual gold production in more than 20 years.

"From this perspective, today's environment closely resembles the 1970s," Costa wrote in a post on social media platform X.

Back then low gold prices led major mining companies to shift their focus to other metals, just before gold experienced one of the most significant bull runs in history.

Today, miners are once again diversifying into base metals, not due to low gold prices, but to capitalize on the growing demand for materials critical to electrification, like copper.

However, this time the shift isn't driven by low prices, but by a strategic move to increase exposure to base metals like copper, which are crucial for electrification and have attracted institutional capital.

Costa argues that neglect of gold, in favor of base metals, is a potential opportunity. With fewer companies exploring and developing new gold projects, he sees several pathways for gold prices to rise, making gold-only investments particularly attractive.

However, Costa sees the limited supply as a bullish catalyst for gold, stating, "I believe it's time to be greedy when others are being fearful."

Thursday's Seven Top Performing Gold Miners

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