Gold Stumbled in September, but Gold Miners Beat Every Sector in the S&P 500

Gold’s September decline does not invalidate the bull market because persistent central-bank and investor demand is offsetting the pressure from higher real yields and a stronger dollar.

• Gold fell 6.3% in September, while the NYSE Arca Gold Miners Index returned 17.4% in Q3, ahead of every S&P 500 sector; the S&P 500 gained 2.3% and energy gained 17.2%.
• The 10-year Treasury real yield ended September at 2.93%, its highest level since November 2008, while the U.S. Dollar Index rose more than 2%; these forces made September gold’s worst month in a decade.
• Historical evidence weakens the simple inverse relationship between gold and real yields: gold lost 28% in 2013 when real yields rose about 1.5 percentage points, but nearly doubled from 2005 to 2007 while real yields stayed between 2% and almost 3%.
• China’s central bank bought more than 20 tonnes in August, extending its buying streak to 22 months, while China imported 1,141 tonnes in the first eight months of the year; U.S.-listed gold ETFs also attracted $3.8 billion in September after $7.9 billion in August.
• Over five years, gold miners returned about 240% versus 137% for gold, yet the sector represents roughly 2% of global equities; miners’ free cash flow per share has risen tenfold since 2020 and their earnings yield is about 12%.

Takeaway: The author expects further volatility but sees continued support from central-bank purchases, seasonal demand and undervalued miners, and recommends a long-term 10% gold allocation split equally between physical gold and high-quality mining stocks, rebalanced regularly.