Market Insights: 🥇 Gold Stocks Look Cheap. Oil Doesn’t. What Gives?

🥇 Gold Breaks Records While Oil Sinks: Commodities 2025 in Contrast

It’s been a while since we checked in on commodity markets, which, like other markets, are having quite the interesting year. 

In particular, gold continues its march upward, while oil remains in a slump. As for the rest, most have been up and down and ended up close to where they were a year ago. 

By the end, you’ll see why gold stocks still look cheap despite these record prices — and why oil stocks, oddly enough, look expensive even as crude declines.

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This week's Market Insights is a 7 minute read! (or read the full article)

Quote of the week

“Tough times helped many commodities producers become lean and mean through consolidation, mergers and cost-cutting. All that excess supply has been sopped up.” 

Jim Rogers

What Happened In The Markets This Week?

Here’s a quick summary of what’s been going on:

✂️ Fed lowers interest rates, signals more cuts ahead ( Reuters )

• As expected, the Fed cut rates by 25 bps and signaled two more cuts this year, even with inflation still projected at 3%.
• Powell and most policymakers are prioritizing labor market cracks over sticky prices, despite dissent from new Trump appointee Stephen Miran, who pushed for deeper cuts.
• This shift toward jobs-first policy could spark more rate cuts than markets had priced in, putting downward pressure on yields and boosting rate-sensitive assets like tech and REITs. But inflation risks haven’t vanished, meaning any risk-on rally could be fragile.
• If the Fed is pivoting to prioritize employment over inflation, expect more rate cuts, and more market volatility, as they walk the tightrope.

💰 Nvidia bets big on Intel with $5 billion stake and chip partnership (Reuters)

• First $2bn from Softbank, then $5.7bn from the U.S. government, and now $5bn from Nvidia. 
• Nvidia and Intel are teaming up to co-develop chips, but Nvidia is not moving its manufacturing away from TSMC (yet).
• The deal gives Intel a badly needed strategic ally and could hurt AMD, Broadcom, and any chipmakers hoping to compete in AI servers.
• Nvidia gets to expand its ecosystem without jeopardizing its current supply chain, while Intel gets relevance in AI servers, without winning a true foundry customer. The real win here is tighter integration: the deal puts Nvidia’s GPU stack directly into Intel’s x86 ecosystem, possibly pressuring AMD’s grip on both the server and PC space.
• Neither party revealed details on the financial terms of their collaboration, or when the first product would come to market, but considering they said they would make “multiple generations” of future products together, it’s a sign of things to come. 

To see our take on these and other market stories, simply check out the

full article!

• 🚘 China is sending its world-beating auto industry into a tailspin (Reuters)

• 🫸 Why Beijing is freezing Nvidia’s access to the Chinese market (CNBC)

• 📉 Winklevoss’ Gemini Space Station Slumps to Fall Below IPO Price (Bloomberg)

• 😎 Meta unveils new smart glasses with a display and wristband controller (TechCrunch)

Now let’s dive into the main piece!

📈 Gold Soars, Oil Slumps, Others Drift

Last week, we said every factor that can shake up bond yields has been in play. And it’s basically been the same story with commodities.

Uncertainty in the economy, geopolitical flashpoints, and swings in other markets have all left their mark. So too, have the simple fundamentals of supply and demand.

Here’s how different commodities have performed over the last 6 and 12 months.

Let’s start with the shiniest of them all... 

🥇 Gold Continues to Shine

The yellow metal is smashing records, and gold bugs are buzzing. It’s as if gold has been working its way through a "reasons to buy me" checklist:

• 💵 Wobbly US Dollar ✅
• 📉 Market volatility ✅
• 🌍 Global tensions ✅
• 🔥 New inflation fears ✅
• ✂️ Rate cuts are back ✅
• 🏦 Central bank stockpiling ✅

A quick look at the charts shows how much the weaker USD has helped fuel this rally. Measured in euros, pounds, or yen, the rise has been far less dramatic — but still steadily upward.

Year-to-Date Gold Price in USD, JPY, EUR and GBP - TradingView

Who’s buying all the gold?

Central banks have been hoarding gold for a few years - a major driver behind the rally. That buying hasn’t stopped, but the pace has cooled over the past 12 months.

But investment demand has surged since mid-2024:

• In Q1, investors bought 552 metric tons, which is more than double the 243 tons central banks picked up.
  
  
• That’s also ahead of the 443 tons taken by the jewelry industry (traditionally the #1 source of demand).

When we say “investment demand,” we're talking about purchases:

• 🛒 By individuals and institutions
• 🏅 In physical form (bars, coins, etc) and via funds like ETFs
• 🎯 For investment or speculative reasons

Flows into Gold ETFs tell us more about this investment demand:

Gold ETF Monthly Flows - Gold.org

✨ We can see that the record-breaking inflows happened during the first three months of Donald Trump's current term, which brought a cocktail of a weaker dollar and tariff-fuelled chaos. 

What could go wrong?

Not everyone thinks this golden run will last. Analysts at Citi are sounding a contrarian note: they see demand fading into Q4 and beyond, with prices potentially sliding to $2,500 by 2026.

Their reasoning?

• 🏦 Central banks have slowed their buying at these lofty price levels.
  
  
• 😨 Investor demand has been driven more by fear than fundamentals.
  
  
• 📈 And they believe confidence in global growth will strengthen as stimulus from the “Big Beautiful Bill” starts to filter through.

✨ If confidence in the global economy does improve, then their reasoning does make sense, considering gold’s narrative as a safe-haven asset. While it might seem like a big IF right now, time will tell!

You’ve likely come across plenty of bullish takes on gold (we covered some back in April). That’s why it’s worth weighing the other side of the argument (currently Citi’s POV), because it’s the best way to make a well-informed decision.

What about the longer-term picture? 

The primary catalysts for gold's continued strength are:

• ✌️ Ditching the Dollar: Around the world, central banks and investors are diversifying their holdings away from the USD. 
• 🌋 Debt-ageddon!: Government balance sheets look like a horror movie. That mountain of debt is a long-term threat to the value of major currencies that continue to print money with no limit.

Last time we checked, those two catalysts are still persisting and aren’t magically fixing themselves.

You've seen why gold is hitting all-time highs, but that's only one side of the commodity story. 

While gold producers look cheap, slumping crude prices are making oil stocks look paradoxically expensive. Understanding this divergence is key to investing in the sector.

So our full piece covers:

🛢️ Our deep dive into the oil slump, including the supply glut that has some analysts forecasting $50 a barrel.

💰 A closer look at gold miners' costs, and why they often struggle to keep up with the price of gold.

⛏️ The outlook for other key commodities, from copper's recent frenzy to natural gas's wild volatility.

💡 The Insight: Commodity Producers aren’t the Same as Other Stocks

The stocks of companies producing gold and oil are polar opposites right now.

Gold stocks are flying, while it’s hard to get too excited about oil producers.

Yet, looking at valuations, you might wonder what’s going on: Gold stocks are trading on what appears to be historically low multiples.

Here’s Newmont’s P/E ratio…

Newmont P/E Ratio - Simply Wall St

But when you look at most of the oil stocks, you’ll see them trading on much higher multiples than a few years ago. Here's Occidental’s P/E ratio…

Occidental Petroleum P/E Ratio - Simply Wall St

We’ve mentioned this before, but it’s worth repeating. Commodities are as cyclical as it gets:

• 📉 When prices are low — Company profits get squeezed, making valuations look expensive because the “E” (earnings) is depressed.
• 📈 When prices are high — Margins widen, profits surge, and those multiples come down.

So if you’re sizing up a commodity stock, the trick isn’t to obsess over today’s P/E ratio. Instead:

• 👉 Look at the catalysts, both positive and negative, to build a story on what you think is most likely to unfold. 
•  👉 Take a view on where the underlying commodity price is heading over the next five years and how that would impact the company's revenue and profits. 
•  👉 Then work backward to figure out what you’re actually willing to pay for the stock based on those future earnings.

Those 3 elements, a story, a forecast and a fair value are the foundations for a well rounded narrative. Check out the community for more great narratives, like  these ones on Cassiar Gold, Avino Silver and Gold Mines, or Chevron.

💬 Join the discussion by leaving a comment!

Gold rally or oil dip: which one are you buying?

Key Events During the Next Week

Tuesday

• 🌎 S&P Global Manufacturing PMI Flash
  • 📈 Forecast 49, Previous 47
  • ➡️ Why it matters: A stronger reading would suggest business confidence is stabilizing.

Thursday

• 🇺🇸 US GDP Growth Rate (Final)
  • 📈 Forecast 3.3%, Previous -0.5% 
  • ➡️ Why it matters: This is the third estimate, so forecasts are unlikely to change, but may give the market confirmation that a recession isn’t on the cards.
    
    
• 🇺🇸 US Durable Goods Orders
  • 📈 Forecast -1.5%, Previous -2.8% 
  • ➡️ Why it matters: Manufacturing activity has been soft - an even slightly better reading would boost sentiment.

Friday

• 🇺🇸 US Core PCE Price Index YoY
  • 📈 Forecast 3%, Previous 2.9% 
  • ➡️ Why it matters: This is the Fed’s preferred measure of inflation. As long as it’s close to consensus, the Fed’s intention to cut twice more this year should remain intact.

In the last few weeks of earnings season, we have a handful of large caps due to report:

• Costco
• Micron Technology
• Accenture
• AutoZone
• KB Home

Until next week, invest well.

Simply Wall St

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