U.S. gold futures surged past the US$4,000 per ounce milestone for the first time on Tuesday, driven by expectations of a Federal Reserve rate cut later this month and persistent safe-haven demand owing to the continuing U.S. government shutdown.
Mutual funds that invest in gold mining firms are overtaking even high-flying AI and tech funds, thanks to bullion’s run.
U.S. gold futures for December delivery settled 0.7 per cent higher on Tuesday at US$4,004.4, after hitting a high of US$4,014.6. Spot gold prices were trading slightly lower.
“It’s ongoing safe-haven flows stemming in part from the government shutdown and no real indication that is likely to be resolved in the immediate term here. So there’s still a pretty decent bid in gold,” said Peter Grant, vice-president and senior metals strategist at Zaner Metals.
Non-yielding gold, which tends to do well during times of uncertainty and low interest-rate environments, has climbed 51 per cent so far this year. The metal’s rally has been driven by a cocktail of factors, including expectations of interest rate cuts, ongoing political and economic uncertainty, solid central bank buying, inflows into gold ETFs and a weak dollar.
The U.S. government shutdown entered its seventh day on Tuesday. The shutdown has postponed the release of key economic indicators, forcing investors to rely on secondary, non-government data to gauge the timing and extent of Fed rate cuts.
Investors are now pricing in a 25-basis-point cut at the Fed meeting this month, with an additional 25-bp cut anticipated in December.
Meanwhile, political turmoil in France and Japan gripped currency and bond markets for a second day.
China’s central bank added gold to its reserves in September for the 11th straight month, data from the People’s Bank of China showed.
Goldman Sachs raised on Monday its December, 2026 gold price forecast to US$4,900 per ounce from $4,300, citing strong Western exchange-traded fund (ETF) inflows and likely central bank buying.
Globally, mutual funds that invest in gold mining firms are leading 2025 performance, overtaking even high-flying AI and tech funds, as investors bet record gold prices will drive strong margins, cashflows and shareholder returns.
According to LSEG Lipper data, gold mining funds have surged about 114 per cent year-to-date, far outpacing technology funds, which are up 27 per cent, and natural resources funds, which have gained around 23.7 per cent. The third quarter alone saw inflows of US$5.4-billion, the largest quarterly move, into gold miner funds since December 2009, according to the data.
In Canada, the materials sector – where gold stocks reside – has risen 81 per cent this year. It has been a key driver behind the nearly 22-per-cent gain in the S&P/TSX Composite Index year to date.
While gold miners had lagged the bullion price in recent years owing to rising costs and operational setbacks, they have outperformed in 2025 as record prices boost profits and cash flows, strengthening balance sheets and offering leveraged exposure to the gold rally.
“Despite the rally, the sector remains widely under-owned, leaving room for new investors to drive further multiple expansion,” said Trevor Yates, senior investment analyst at Global X ETFs.
“We’re particularly constructive on smaller miners and explorers which offer greater leverage to the gold price and are set to be beneficiaries of continued industry consolidation.”
George Cheveley, portfolio manager at investment management firm Ninety One, said strong earnings are reinforcing cost discipline, with some miners accelerating projects funded by cash, a move that supports growth and avoids the need for borrowing.
Gold miner Newmont Corp. reported stronger-than-expected second quarter profits and announced a US$3-billion share buyback program, while peer Barrick Mining Corp. beat profit forecasts and raised its quarterly dividend by 50 per cent.
Some companies are seizing the rally to boost capital through IPOs and share sales. China’s Zijin Gold International raised US$3.2-billion in Hong Kong, while Merdeka Gold secured US$280-million.
Despite doubling in 2025, the MSCI gold miners index still trades at a forward P/E of 14.3, below its ten-year average of 16.7, suggesting room for valuation expansion.
“At 30% free cash flow [FCF] margins, gold companies have never had it better,” said Adrian Hammond, a research analyst at SBG Securities.
There were opportunities for investors in companies disciplined about cash and keen to reward shareholders, he said.
With reports from Darcy Keith of The Globe and Mail