Gold Stocks on the Dip: A Cycle-Driven Assessment of Newmont and Barrick

The long-term setup for gold remains structurally supportive. After a historic run in 2025, where prices climbed as much as 55% and surpassed $4,000 an ounce for the first time, the metal is viewed as a core portfolio diversifier. This rally was powered by a confluence of factors: persistent tariff uncertainty, a weaker U.S. dollar, and robust demand from both central banks and investors. Central bank buying, in particular, has become a reliable anchor, with J.P. Morgan noting demand averaging 585 tonnes a quarter in 2026. The outlook for 2026 and 2027 remains bullish, with analysts forecasting prices to push toward $5,000/oz by year-end 2026.

Yet, within this bullish cycle, sharp pullbacks are a feature, not a bug. This dynamic played out acutely on January 30, 2026. A wave of speculation surrounding a potential change in Federal Reserve leadership triggered a steep sell-off, with some calling it a "Black Friday" for the metal. The reaction was amplified for gold stocks, which plunged more than the underlying commodity. Shares of Newmont and Barrick both fell by double-digit percentages that day, a classic sign of leveraged volatility in the sector.

This episode frames the current market tension. The sell-off was a reaction to a specific policy uncertainty, not a reversal of the macro trends. The core drivers-diversification needs, central bank accumulation, and a potential path of lower real interest rates-remain intact. In this light, the recent dip appears to be a cyclical correction within a longer-term bullish cycle. For investors, the question shifts from whether gold will fall further in the short term to whether this pullback offers a strategic entry point into a market still expected to climb toward $5,000/oz by year-end 2026.

Miners' Financial Resilience: Profitability vs. Price Volatility

The recent sell-off has tested the market's patience, but it has also laid bare a fundamental strength in the largest gold producers. For Newmont and Barrick, the drop in the gold price is a distant concern compared to their robust cost structures and earnings power. Their extremely low all-in sustaining costs (AISC) provide a massive buffer against commodity volatility. In the third quarter of 2025, Newmont's AISC stood at $1,566 per ounce, while Barrick's was even lower at $1,538 per ounce. With spot gold prices hovering around $4,622 as of early February, both companies operate with gross profit margins that are historically unprecedented, well over 160% at that level.

This cost advantage translates directly into financial resilience. Even after the January pullback, their forward price-to-earnings ratios remain reasonable, at 15.7 for Newmont and 12.5 for Barrick. This contrasts sharply with the valuation of the broader gold sector, represented by the gold stock ETF (GOLD), which trades at a forward P/E of 30.85. The gap is telling. It illustrates that the market is pricing the metal itself as a speculative asset, while the producers are valued for their tangible earnings and operational efficiency.

The bottom line is one of asymmetric risk. For the miners, the macro cycle is their friend. Their low costs mean they are not just surviving a price dip; they are likely to see their profit margins expand as the gold price recovers. The volatility in their stock prices, which can double that of the underlying metal, is a function of leverage and sentiment, not a reflection of deteriorating fundamentals. In this setup, the recent pullback may be a tactical entry point, but the real story is one of durable profitability insulated by a fortress-like cost structure.

Valuation and Scenario Analysis: Weighing the Cycle Against the Dip

The forward view for gold hinges on a clear dichotomy of scenarios, each with distinct implications for price and risk. The primary bullish case is built on the macro cycle that drove the historic 2025 rally. Sustained central bank demand, averaging 585 tonnes a quarter in 2026, combined with robust retail investor flows and gold's enduring role as a portfolio diversifier, provides a solid floor. If geopolitical and economic uncertainty persist, supporting a weaker dollar and lower real rates, the metal is poised for a continued climb. Analysts at J.P. Morgan project prices could push toward $5,000/oz by year-end 2026, with the longer-term trajectory extending toward $6,000/oz.

The key risk to this scenario is a successful policy outcome that accelerates growth and reduces the perceived need for safe-haven assets. Evidence suggests that a successful outcome from policies set by the Trump administration could lead to higher interest rates and a stronger U.S. dollar, directly pressuring gold's non-yielding appeal. This "shallow slip" scenario, where growth surprises to the upside, would likely cap gains and could trigger a more pronounced pullback, especially in leveraged gold stocks.

This tension between scenarios underscores a critical valuation insight. The gold stock ETF (GOLD) trades at a forward P/E of 30.85, a premium that prices in continued speculative momentum. In contrast, the producers Newmont and Barrick, with their fortress-like cost structures, trade at more reasonable forward P/E ratios of 15.7 and 12.5, respectively. This disconnect suggests that if the bullish macro cycle holds, gold stocks may offer better risk-adjusted returns than the metal itself. Their earnings power provides a tangible anchor, allowing them to participate in a rising gold price while being less vulnerable to the volatility that often accompanies the commodity.

Yet, the higher volatility of the stocks remains a material trade-off. Their price action is magnified by leverage, as seen in the double-digit percentage drops during the January sell-off. For investors, the conclusion is one of asymmetric positioning. The cyclical setup favors gold, but the valuation and financial resilience of the miners make them a more compelling vehicle for capturing that cycle's upside. The risk is that a shift in the macro backdrop could see gold prices stall or fall, a move that would disproportionately hurt the leveraged equity names. In this environment, the cycle is the story, but the stock selection is the strategy.

Catalysts and What to Watch

The bullish cycle thesis for gold and its miners is now on a watchlist. The recent pullback has shifted focus from broad macro trends to specific, near-term events that will confirm the durability of the structural demand and monetary tailwinds. Investors must monitor three key catalysts to gauge the path ahead.

First, the strength of central bank demand is the most critical structural signal. Consensus estimates point to purchases of around 800 tonnes over 2026, a pace that would represent a significant portion of annual mine output. Quarterly data from the World Gold Council will be the primary gauge. A sustained flow at or above this level would validate the long-term portfolio-diversification trend and provide a reliable floor for prices. Conversely, a notable slowdown would challenge the core demand thesis and likely pressure the metal.

Second, the macro proxies of real interest rates and the U.S. dollar remain pivotal. Gold's price is inversely linked to the real yield on U.S. Treasuries and the strength of the dollar. The recent rally was supported by a reduction in the federal funds rate and expectations for further cuts. Investors should watch for shifts in the Treasury yield curve and the U.S. Dollar Index. A reversal in the trend toward lower real rates or a sustained rally in the dollar would directly counter the supportive monetary backdrop and could cap gains.

Finally, for the miners themselves, the focus turns to operational execution. The recent dip has highlighted the importance of their fortress-like cost structures. Upcoming quarterly earnings reports will be the test. The key metrics are actual all-in sustaining costs (AISC) and production guidance. Consistent performance at or below the ultra-low levels seen in Q3 2025-Newmont at $1,566 and Barrick at $1,538 per ounce-will confirm their financial resilience. Any widening of the gap between spot gold prices and these costs would be a positive surprise, while guidance that signals production challenges or cost inflation would be a red flag for earnings power.

The bottom line is that the cycle provides the direction, but these catalysts will dictate the timing and magnitude of the next leg up. For now, the watchlist is clear: central bank data, Treasury yields, the dollar, and the miners' own cost discipline.