Gold has been grabbing headlines with a powerful rally, but Frank Holmes, CEO of U.S. Global Investors (NASDAQ:GROW), argues the bigger story may be unfolding beneath the surface.
Gold miners have dramatically outpaced the metal itself, posting one of their strongest weekly gains in decades. Holmes says the move comes despite traditionally unfavorable conditions for gold, including elevated real interest rates, while investor positioning remains surprisingly restrained. At the same time, miners are generating significantly more cash flow, expanding margins and taking a more disciplined approach to capital allocation.
In this op-ed, Holmes explains why he believes the gold mining sector may only now be waking up.
Gold jumped more than 7% in the week ending August 7, one of best weeks since 1990. That’s the news many of you read.
What didn’t make the headlines is what happened to the companies that pull the metal out of the ground. The NYSE Arca Gold Miners Index rose over 20% in the same week. In the 22 years since that index launched, only one week has been better: December 12, 2008, when the financial system was falling apart.
As someone who’s been in the business for 40 years, I can tell you a move like that usually means one of two things. Either something is badly broken, or the market has been asleep on something and just woke up.
In this case, I believe it’s the second one.
Gold is defying its biggest headwind
Why do I say that? Historically, gold has struggled when real interest rates rise, because the metal pays you nothing and Treasurys start paying you something. Right now, the 10-year real yield sits around 2.43%, near the top of its three-year range and up roughly 75 basis points since February.
Well, guess what? Gold rallied anyway.
A decline in the U.S. dollar helped, but the rate story didn’t cooperate at all. When as asset goes up while its main headwind is getting stronger, that tells you the buyers aren’t there for the reason they should be. Central banks have been accumulating. So have people who’ve noticed what’s happened to the purchasing power of the money in their wallet.
The buyers aren’t chasing gold… yet
The most interesting thing about this rally, I believe, is how few people are in it.
Managed money—the hedge funds and futures speculators who normally pile into a hot trade—held 215,567 net long gold contracts back in February 2025, when gold traded near $2,904. As of the end of July 2026, with gold near $4,038, they held 123,586.
That’s 43% less exposure at a price nearly 40% higher.
Look at physical holders and you see the same restraint from the other direction. Gold fell nearly 19% from its February average to July, but total gold held in ETFs fell only 3.8%. People who own the metal watched a 19% drawdown and sold under 4% of their holdings.
Right now, hedge funds don’t appear to be participating, and the people who are here aren’t leaving.
Gold miners are making more and spending smarter
Since the third quarter of 2022, the average price senior gold producers received for an ounce has risen 161%. Meanwhile, their all-in sustaining costs (AISC)—which includes sustaining capital, not just the cash cost of digging—rose “only” 53%. The margin, therefore, went from about $521 an ounce to roughly $2,636.
Free cash flow per share across the gold miners index climbed from $9.76 in the third quarter of 2024 to a remarkable $45.69 in the second quarter of 2026. That’s nearly five times in eight quarters. Free cash flow yield went from 2.14% to 5.94%.
Meanwhile, the payout ratio for miners is about 27%, according to Bloomberg data. Dividends have roughly doubled while three-quarters of the cash has stayed inside the business.
If you lived through 2011, you know why I’m pointing this out. Back then, these companies took record cash flow… and lit it on fire. They chased overpriced acquisitions, vanity projects and share issuances that diluted shareholder value. Today appears to be a more rational business environment.
Frank Holmes is the CEO and Chief Investment Officer of U.S. Global Investors (NASDAQ:GROW) (U.S. Global Investors (NASDAQ:GROW)). With over 30 years of experience, he leads the company's mutual funds, receiving recognition from Lipper and Morningstar, and ventured into the exchange-traded fund (ETF) business in 2015. Additionally, Holmes serves as executive chairman of HIVE Blockchain Technologies, the first cryptocurrency mining company to go public, mining Bitcoin, and is a renowned keynote speaker at national and international investment conferences.