Gold breaks through $4500 is just the starting point! Mining stocks have a tenfold growth opportunity coming.

Gold prices have skyrocketed 119% over the past two years, breaking through $4,500 to reach a historic high, but relative to stocks and bonds, gold is still below its 1980 peak. The Dow/Gold ratio remains at 10:1, indicating that there is still significant room for appreciation of physical assets relative to financial assets. More critically, gold mining stocks are experiencing a “crocodile mouth” effect, with most miners maintaining a sustainable cost of only $2,200, creating a profit space with a current price difference exceeding $2,300.

4500 USD is not the endpoint: Relative valuation reveals the room for rebound

(Source: Topdown Charts)

When the price of gold broke through $4500, Wall Street was filled with “fear of heights” noise. The visual impact of the nominal price instinctively made most investors want to take profits. However, if we strip away the fog of fiat currency depreciation and examine the current market through the microscope of relative value, a shocking truth emerges: gold is not only not overvalued, it is “cheaper” than it has been at any time in the past few decades relative to stocks, bonds, and corporate profitability.

According to the latest data, the price of gold relative to cash has surpassed the historical extreme value of 1980. This marks a cliff-like decline in the purchasing power of fiat currency relative to hard currency. Nevertheless, gold is still at the “halfway up the mountain” compared to other core assets. Over the past two years, gold's return rate has crushed stocks, bonds, and cash at an almost vertical angle. However, this is not a bubble, but the beginning of “mean reversion.” Compared to stocks and bonds, gold prices are still 50% and 17% lower, respectively, than the peaks of 1980.

The Dow/Gold Ratio is the ultimate indicator of the relative expensiveness of financial assets compared to real assets. In 1980, during a gold frenzy, the ratio fell to 1:1 (Dow index at 800 points, gold price at 800 dollars). In 2025, despite a significant rise in gold prices, the ratio remains around 10:1. This means that in order to return to the “gold standard awareness awakening” state of 1980, there is still a huge appreciation space for real assets relative to financial assets. This indicates that if we are to reach the frenzy levels of that year, gold still has significant potential for a rebound.

This is not a simple technical correction, but a “system reset” of the global monetary system. We are not only witnesses to this historic surge, but we should also be steadfast participants. The current strategy is simple: hold on tight, stay steady, and don't get thrown off the ride.

Mandatory Buy Order Engine Under Financial Dominance

Why has the surge in gold prices been so fierce and unusual this time? The core driving force is no longer just simple CPI inflation, but rather “Fiscal Dominance.” As global government debt interest expenses rise exponentially, central banks lose their independence. They are forced to print money to buy government bonds, which directly undermines the underlying logic of sovereign bonds—bonds are no longer risk-free assets, but have become sources of risk.

Global government interest expenditures show an astonishing positive correlation with gold prices. As interest expenditures surpass the 5 trillion dollar mark, both have exhibited a synchronized parabolic rise. As long as the debt snowball continues to roll, the upward momentum of gold prices will not be depleted. This structural force is far more persistent than short-term inflation data or geopolitical events.

The interest expenditure of the US federal government in 2025 has surpassed the defense budget, becoming the second largest expenditure item. This financial pressure forces the Federal Reserve to make choices between raising interest rates and fiscal stability. When rising interest rates lead to government bankruptcy, the central bank can only choose to print money to purchase bonds. Once this “fiscal dominance” state is formed, it is difficult to reverse, as the compounding effect of debt will continue to exacerbate the problem.

In this context, holding government bonds means holding a diluted commitment. Gold, as a tangible asset that does not depend on any government credit, naturally becomes a safe haven for capital. This is not only a traditional hedging demand but also a structural response to the trust crisis of the entire fiat currency system.

Crocodile Mouth Effect of Mining Stocks and Double Profit from Shanghai Premium

If physical gold is the bottom warehouse, then gold mining stocks will be the offensive weapon in 2025. During the gold surge over the past two years, mining stocks lagged at one point. However, after gold prices broke through 4500 USD, the vast majority of miners' all-in sustaining costs (AISC) remain controlled below 2200 USD. This means that for every 1% increase in gold prices, miners' net profits could rise by 3% or even 5%.

This is the famous “crocodile mouth” pattern. The gold price rises linearly, while the miners' free cash flow shows exponential growth. When the gold price rises from $3000 to $4500, the miners' profit skyrockets from $800 per ounce ($3000-2200) to $2300 ($4500-2200), an increase of 187%. Currently, buying mining stocks is equivalent to purchasing a printing machine that is running at full speed at a low valuation.

For Chinese investors, it is not enough to only pay attention to the US dollar gold price. Against the backdrop of global “de-dollarization” and “gold moving eastward,” the renminbi gold is emerging with an independent and stronger trend. The “Shanghai premium” has seen a structural surge, as the Asian market's demand for physical delivery far exceeds the “paper gold” trading in Europe and the United States, resulting in the gold price on the Shanghai Gold Exchange (SGE) being persistently higher than that in London (LBMA) and New York (COMEX).

Analysis of the Three Major High-Profit Paths for Gold Investment

Physical Gold: Capturing the β Returns from Currency Dilution

· The peak value of 4500 USD adjusted for inflation in 1980 still has room.

· Dow/Gold Ratio 10:1 vs 1:1 in 1980 shows potential for catch-up.

· Holding RMB gold additionally earns a Shanghai premium of 50-80 USD α收益

Gold Mining Stocks: Leverage Amplifying Offensive Tools

· Sustaining cost 2200 USD vs gold price 4500 USD, profit over 2300 USD

· For every 1% increase in gold prices, mining companies' net profit may rise by 3-5%.

· The free cash flow index has exploded, and the crocodile mouth effect is fully activated.

Shanghai Gold: Structural Premium of West to East Transfer

· The Shanghai gold is consistently higher than the London gold by 50-80 USD, having once surpassed 100 USD.

· The trend of physical gold inflow to the East is irreversible.

· RMB holders earn dual benefits from the rise in gold prices and the expansion of premiums.

The surge in gold prices over the past two years is only the beginning of “mean reversion,” not the end of a bubble. Global debt interest payments have surpassed 5 trillion USD, and fiscal dominance forces central banks to continue printing money to buy bonds. This structural force will continue to drive gold prices up. The lesson from 1980 is that the final stage of a gold bull market is often the craziest and most irrational, marking the transition from “skepticism” to “panic buying” among the public. The current price of 4500 USD, adjusted for inflation relative to the 1980 peak, and even in relation to the current global money supply, has not yet reached bubble levels. The global debt crisis is providing an endless supply of fuel for gold prices, while the explosion of mining stocks and the expansion of Eastern premiums are the most anticipated developments in the second half of this bull market.