Is it possible to make golden gains from mining stocks?

Last year, the price of gold and silver outperformed the stock markets, so mining stocks can be a good, if erratic, way to get exposure

One strategy to increase the exposure of your portfolio to gold and other industrial and precious metals is to invest in mining stocks.

Investing in shares of mining firms that extract commodities like gold, silver, or rare earth elements from the earth is growing in popularity. The FTSE 100 mining behemoths Glencore (LON:GLEN) and Fresnillo (LON:FRES) were the second and third most popular stocks among Interactive Investors users in January, which also happened to be a month with notable gold and silver prices.

You can take advantage of changes in commodity prices in three different ways.

A physical commodity, like a gold bar, or a physically backed product, like an exchange-traded commodity (ETC, which is comparable to an exchange-traded fund or ETF), can be purchased. You can directly monitor changes in commodity prices with this strategy.

An alternative is to invest in futures contracts. These appreciate in value when markets anticipate future increases in commodity prices. However, they are time-limited, and there are extra fees associated with extending these contracts past their term, which is typically three to twelve months.

The third strategy is to purchase stock in mining firms. Despite the risks involved, these frequently yield higher returns than buying the actual product.

According to Evy Hambro, portfolio manager at BlackRock World Mining Trust (LON:BRWM), "a gold bar will perform like the price of gold." While there is a little more volatility with gold mining companies, there is also a chance for amazing returns through dividends, MandA, exploration success, and production growth.

What is the process of buying mining stocks?

The companies that extract commodities from the earth are represented by mining stocks.

The value of the commodity a mining company sells less the cost of production is, in essence, the profit it makes. A portion of those profits are yours if you own their shares.

Located along the Goldfields Highway in Kalgoorlie, Western Australia, the Super Pit, also known as the Fimiston Open Pit, is Australia's largest open pit gold mine.

Situated along the Goldfields Highway in Kalgoorlie, Western Australia, the Super Pit, also known as the Fimiston Open Pit, is Australia's largest open pit gold mine.

Compared to tangible commodities, mining stocks have both positive and negative risks, according to Hambro. "On the down side, you might experience an operational problem. There could be strikes or the mine flooding," he says. Additionally, they run the risk of seeing an increase in operating expenses due to price increases for their inputs, like an increase in the price of oil. Furthermore, the performance of a mining company is dependent on the management team's ability to make decisions, which can vary, whereas physical gold simply sits there and gains or loses value as the price fluctuates.

However, mining stocks could profit from a variety of tailwinds, such as new discoveries extending a mine's life or a competitor's acquisition abruptly raising the share price. Additionally, mining stocks have the ability to and do pay dividends, in contrast to actual gold (or silver, copper, or any other commodity).

What impact do commodity prices have on mining stocks?

Assuming that mining companies' underlying costs remain relatively constant, rising commodity prices have the potential to generate significantly higher profits.

A 79 percent increase in adjusted earnings per share to £1.104 in Q4 2025 was announced on February 5th by Barrick Mining (NYSE:B), one of the biggest gold mining companies in the world. In comparison to the prior quarter, management raised its quarterly dividend by over 140 percent.

Between February 11 and the end of the year, the price of Barricks' stock rose by 210 percent. While the spot price of physical gold increased by a relatively modest 75% during the same period, Fresnillo's shares increased by 390%. Meanwhile, the spot price of silver, which Fresnillo mines in large quantities, gained 162%.

In a roundabout way, this means that mining stocks are riskier investments than physical commodities because they are more volatile, but when things go right, the extra risk can be offset by much larger rewards.

Can the price of commodities continue to rise?

The sharp increase in the price of industrial and precious metals over the past year has helped mining stocks. When it comes to investing, this raises questions about whether prices can keep rising.

According to Hambro, the volatility observed in the price of precious metals through late January and early February 2026 is indicative of a trend in which metals prices stabilize at a higher level after experiencing a period of sharp increases.

He stated, "There is caution about such a big rise. Metals prices have gone up a lot, and some people think they might come down." "People may wish to keep a portion of the profits.

However, people grow more at ease with that price range as time passes and prices don't drop. Their assumptions will begin to take that price range into account. As buyers begin to reenter the market, this ultimately results in additional purchases of metals and associated assets.

What are royalties for mining?

The potential for royalties rather than dividends to return capital is an intriguing feature of mining stocks in comparison to other types of stocks.

The equity at the bottom of the balance sheet, which is accumulated through profits, is used to pay dividends. However, royalties represent a portion of a mining company's earnings.

It is typically necessary to make a sizable initial investment in a mining company in order to access mining royalties. They are therefore rather out of reach for the majority of individual investors; however, they grant the investor a portion of the mine's sales for as long as it is in operation.

There are two major benefits to this: first, you get paid from sales rather than profits. You still receive the same percentage of sales even if the miners' costs increase, unlike equity and dividends, which are paid only after all operating costs and taxes have been covered.

Second, you will receive royalty payments for a longer period of time without incurring additional costs if the mine's life is prolonged.

Certain investment trusts, such as BlackRock World Mining Trust, have royalties contracts, but most individual investors find it difficult to access royalties.

How to buy mining stocks.

The simplest method of investing in mining stocks is to purchase the shares directly, which is possible through the majority of brokers. However, it may be wiser to diversify your exposure rather than investing your whole commodities allocation in a single miner due to the unique risks associated with mining stocks as opposed to physical commodities.

The Jupiter Gold and Silver Fund and the SVS Baker Steel Gold and Precious Metals Fund are two funds that are specifically focused on mining stocks.

Many ETFs are devoted to mining stocks, such as the WisdomTree Strategic Metals and Rare Earths Miners UCITS ETF (LON:WREE), which invests in companies that produce rare earths and other essential materials for the energy transition; the HANetf ICAV Sprott Copper Miners ESG Screened UCITS ETF (LON:COPP), which mainly invests in stocks related to copper mining; and the L&G Gold Mining UCITS ETF (LON:AUCP), which concentrates on gold miners.

Or, in addition to BlackRock World Mining, there are investment trusts like CQS Natural Resources (LON:CYN) and Golden Prospect Precious Metals (LON:GPM); both have the same management, but CQS Natural Resources is more diversified across both industrial and precious metals (and includes some exposure to non-mined commodities like oil and gas), while Golden Prospect is primarily focused on miners of precious metals.