Economist Peter Schiff argued that rising bond yields may ultimately strengthen gold’s appeal as inflation erodes the real value of fixed-income investments. In a post on X on Tuesday, Schiff stated that traders selling gold due to higher yields are misreading the market dynamics.

"Traders selling gold today still don’t understand what’s happening," Schiff wrote. "Rising bond yields won’t compete with gold, they’ll drive more money into gold."

Market Context

Schiff’s view challenges the conventional perspective that higher yields make gold less attractive because bonds provide income while gold does not. Instead, he focused on the impact of inflation on bond returns.

"As inflation causes bonds to lose value, investors seeking to avoid losses will sell and buy gold as an alternative store of value," he said.

Treasury Yields and Gold Prices

The 30-year U.S. Treasury yield briefly hit 5.323%, its highest level since 2007. The 10-year yield held above 4.7% as investors demanded higher returns amid inflation and rising government borrowing concerns. This move occurred despite fading expectations for a September Federal Reserve rate hike.

Gold prices had fallen more than 27% from their January peak last month due to weaker ETF demand and rising Treasury yields. However, technical indicators showed potential signs of a bottom near $3,940.

Earlier this month, gold rebounded to $4,367 after a weak July jobs report showed the U.S. economy lost 23,000 jobs versus expectations for an 85,000 gain. Lower Treasury yields and a weaker dollar boosted gold, while strong ETF demand added momentum.

SPDR Gold Shares attracted $896 million in weekly inflows and more than $1.78 billion over the prior month.

What the Numbers Show

The divergence between the recent surge in Treasury yields (30-year at 5.323%) and the simultaneous rebound in gold prices ($4,367) highlights a shift in investor behavior. While rising yields typically pressure non-yielding assets, the combination of weak employment data (-23,000 jobs vs +85,000 expected) and significant ETF inflows ($1.78 billion monthly) suggests investors are prioritizing safe-haven assets over yield-seeking strategies despite higher borrowing costs.

Gold mining stocks are experiencing a significant resurgence, with the VanEck Gold Miners ETF (NYSE: GDX) rising 23.75% in August. This performance represents the fund's best month since April 2020, when it gained 40% during the initial wave of pandemic stimulus. The fund traded near $90 on Monday.

Two primary factors are driving this momentum. First, gold prices have climbed above $4,400 an ounce, on track for a third consecutive week of gains. For miners, higher bullion prices typically translate into stronger revenue and wider margins, provided production costs remain contained. Second, crude oil—a critical input cost for mining operations—has stayed broadly between $70 and $85 a barrel. This is well below the March peak near $120 that followed the closure of the Strait of Hormuz.

What the Numbers Show

The current market environment presents a favorable cost-revenue dynamic for the sector. Diesel powers trucks, shovels, and generators at most mine sites, meaning cheaper crude helps hold down the cost of producing an ounce. Imaru Casanova, portfolio manager for gold and precious metals at VanEck, noted that investors often overstate fuel risk. Energy accounts for roughly 15% to 20% of all-in sustaining costs (AISC), whereas labor is the larger expense at 35% to 50%.

Newmont Corp. (NYSE: NEM), the world's largest gold producer, illustrates this sensitivity. The company built its 2026 plan on $70 Brent crude. It estimates that a $10 move in the barrel price shifts costs by about $60 million, or roughly $11 an ounce. Casanova highlighted that these variables are linked: the instability elevating energy prices is the same instability driving investors toward gold, meaning cost pressure and revenue support tend to arrive together.

Sector Margin Expansion

VanEck estimates that second-quarter all-in sustaining costs came in below $2,000 an ounce across the sector. With gold trading above $4,400, this leaves operating margins near their widest levels in the industry's history.

Five individual miners have already risen more than 30% this month through August 17:

If gold remains near current levels, miners may not need another record price to keep generating exceptional margins. They simply need the market to start believing those margins are sustainable.