Gold miners are having a better month than chips did in years

Gold mining stocks are on a tear, with their surge in August outpacing anything chip stocks have managed in years.

The MSCI global gold miners index is up 43% this month, on track for its biggest monthly gain on record. Even at their hottest this year, chip stocks haven’t matched that pace: the MSCI world semiconductor gauge and Philadelphia semiconductor index posted their best month in April, rising 27% and 38%, respectively.

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The rally took off after the US Treasury surprised markets earlier this month with a plan to expand bond buybacks and push down borrowing costs. That revived the so-called debasement trade — a bet that currencies like the dollar will keep losing value, driving investors toward alternative assets such as gold to protect their wealth.

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“From the equity perspective, gold is one of our largest overweights,” said Tomasz Godziek, head of equities at Bank J. Safra Sarasin. He likes the dollar-debasement story, but also sees gold as a strategic asset that central banks can use to diversify their reserves.

Read: Gold boom boosts Harmony profit

The price of gold has jumped 13% so far this month and is trading above $4 500 an ounce. The rally has drawn broad participation, with holdings in bullion-backed exchange-traded funds tracked by Bloomberg rising the most since September.

Matthew See, JPMorgan Chase & Co’s head of Asia-Pacific specialist sales and market thematics, favours large-cap miners such as Zijin Mining Group Co., which has gained 14% this month, compared with a 1% decline in the benchmark Hang Seng Index. He also sees potential for other precious metals such as platinum to benefit as the cycle gains momentum, according to a note to clients this week.

Tech Outlook

Meanwhile, tech stocks have been weighed down by higher global bond yields and growing doubts over whether massive AI spending will pay off, though a bullish sales outlook from Nvidia Corp. this week has helped reassure investors that AI-related growth remains robust.

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“Should the hyperscalers maintain their margins and convince investors that the capex is converting into future earnings, I would be less confident making the call that gold miners outperform from here,” said Kaia Parv, market strategist at First Degree Global Asset Management.

Investors remain bullish on gold longer-term as tight supply, steady central bank buying and strong inflows are all working in its favor. For now, many are watching for clues from Federal Reserve Chairman Kevin Warsh’s upcoming Jackson Hole speech on where the debasement trade heads next.

Read: Harmony Gold profit doubles on soaring prices despite hedge loss

“ETF flows were often a key driver of bullion prices, and the recent resurgence in holdings suggests investors are increasingly seeking portfolio protection amid fiscal, geopolitical, and macroeconomic uncertainty,” Fahad Tariq, an equity strategist at Jefferies Group LLC, wrote in a note.

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