Gold miners' bull run squeezed as prices plummet and energy costs soar

Gold price fell sharply on Monday morning as investors continued to ditch exposure to the precious yellow metal, which is having its status as a safe-haven trade tested amid the ongoing war in Iran.

The recent move lower inevitably has second-order effects on miners, whose market values soared before the war as gold prices skyrocketed.

Mining companies are among the most volatile stocks, typically acting as a leveraged bet on the gold price, rising during a commodities bull run and falling further during a sell-off. Since the war, the price of gold has fallen, lowering miners' revenues, and the oil and gas supply shock has boosted energy prices, raising their costs.

Before the conflict, they had enjoyed remarkable gains as the gold price soared to all-time highs of over $5,500 per ounce. The gold spot price has fallen by around 25% from its peak at the end of January and was last seen trading at $4,250 as of 6:05 a.m. E.T. on Monday.

The VanEck Gold Miners ETF rose almost 200% in 2025, but has since shed some of those gains. The fund has dropped 27% year-to-date and is showing little sign of recovery as the U.S. and Israel's war against Iran intensifies.

How the price of the VanEck Gold Miners ETF compares to the gold spot price through 2026 so far.

The outlook for miners has changed significantly over the past couple of weeks, with market volatility squeezing margins at both ends. 

"It is interesting to see resources sector reactions on both an energy supply shock and geopolitical risk event," said Rob Stein, head of resources research at Macquarie Capital.

"The combination of the two with increased uncertainty is potentially driving change at the asset allocation level, with the recent rally a base to take profit, especially in the smaller end of the market."

Russ Mould, investment director at AJ Bell, added that higher energy costs are a "genuine threat" to gold miners' margins. 

"We saw this in 2006-07, as overall production costs rose sharply," he added.

While gold bullion is a pure commodities play, miners bring additional equity risk that leaves them sensitive to an increasingly volatile macroeconomic environment.

"Miners are heavily exposed to economic shocks, which explains why investors are pulling back in this area," said Michael Field, chief equity strategist at Morningstar.

"Unless risk sentiment improves and confidence in global growth is restored, it's unlikely that miners will resume their bullish path."

Field added that there's also an element of investors taking gains and selling their best-performing assets of recent years to raise cash. 

The retreat from gold — which is traditionally seen as a key safe-haven asset in times of market turmoil — chimes with the ongoing risk-off sentiment in markets as the Iran conflict fuels concerns over inflation and rising energy prices.

The prospect of higher interest rates as a result of the war could boost government bonds among investors, at the expense of non-yielding precious metals, market strategists told CNBC recently.