Happy Sunday, GoldBuzzers!

Welcome to Part 3 of our series on managing your risk in precious metals. Today I’ll be looking at the gold miners, where the story is genuinely different from bullion. During bull markets, mining stocks can deliver upside that gold and silver can't match, but they also come with drawdowns that have ended most retail positions. Today's piece is also more personal than the first two.

Ok. Let’s get into it. ⬇️

Gold and silver both slipped on Friday as the Fed's hawkish shift stole the spotlight. Gold’s drop to $4,505 per ounce marked a second straight weekly decline, while silver eased to around $75.46. Not surprising as oil prices sit near four-year highs thanks to the ongoing US-Iran standoff in the Strait of Hormuz.

That's feeding persistent inflation (the Fed's preferred measure hit 3.8% in April, nearly double its 2% target), and the rate hike talk is getting louder by the week. Fed Governor Christopher Waller, who spent the past year pushing for lower rates, did a full about-face on Friday from Frankfurt, calling on the Fed to drop the "easing bias" from its policy statement and warning that talking about rate cuts with inflation running this hot is not serious central banking.

Three Fed officials already dissented at the April meeting, and markets are now pricing in roughly a two-in-three chance of a quarter-point hike by October. Meanwhile, Secretary of State Rubio described "slight progress" in mediated US-Iran peace talks but stressed that both sides remain far apart, keeping the oil supply risk firmly in play.

It all adds up to a tricky environment for precious metals: inflation should be bullish for gold, but the rising probability of a rate hike is pulling capital toward the dollar instead. Worth noting that new Fed Chair Kevin Warsh was sworn in on the very same day Waller went hawkish, and his first policy meeting on June 16-17 could set the tone for the rest of the year.

Almost everything I know about making money investing in precious metals came from losing money in them at the start. My expertise grew directly out of my mistakes. So did my passion that led to the four years of Theseus research. That same passion drove me to build the GoldBuzz community and it all came from making those early mistakes. It's not always comfortable to talk about these things publicly, but if it helps anyone reading this, it’s worth it.

Let me tell you about one of the worst investing experiences of my life - a gold mining stock called Great Basin Gold.

I bought it sometime in late 2009 or early 2010, during the last great precious metals bull market we’ve covered in Part 1 and Part 2 of this series. GBG was a Canadian-listed gold miner whose main operating asset was the Burnstone mine in South Africa, in the Witwatersrand basin, the most famous gold-producing region in history. The company was widely promoted by several gold experts at the time as one of the next significant producers in the sector, with tremendous upside.

For a couple of years, the trade worked beautifully. As gold ran from around $700 in late 2008 to $1,920 in August 2011, Great Basin Gold ran with it. By mid-2011 I was sitting on substantial paper profits in GBG.

Then it all started to come apart.

The price started to fall most days, even when gold was still rising. There were reports that the Burnstone mine had persistent operational problems. The company’s cash production cost was running far above sustainable levels. Financing arrangements kept needing to be restructured, but the consensus amongst the online gold community was still largely positive. One article even said it was a much better bargain now that its price was 40% off its highs.

I knew I should liquidate my positions, but somehow I couldn’t face taking that loss. Then one day in September 2012, just after the market closed, the company announced that it had suspended business operations. By the time the market re-opened the next morning, the stock dropped a further 55%. It was now officially a penny stock.

The TSX finally delisted GBG the following month. The Hollister assets in Nevada were sold at auction in April 2013 for $15 million, a fraction of what the company had once been valued at. Shareholders, including me, received essentially nothing.

That experience taught me something the bullion story in Parts 1 and 2 doesn’t fully capture. With gold and silver, the worst case is a deep drawdown that eventually recovers. With individual mining stocks, the worst case is total loss. The gold bull market doesn’t save them.

What’s different about miners

This is Part 3 of the series on managing your risk in precious metals. Parts 1 and 2 looked at gold and silver, where simple moving average filters meaningfully reduced the worst drawdowns at modest cost. Today, it’s the turn of the gold miners. The story is different from bullion in two important ways.

The first is that mining stocks are leveraged plays on the underlying metal. A 20% move in gold can produce a 50% move in mining stocks, in either direction. This amplification cuts both ways.

The second is that mining stocks carry equity risk on top of commodity risk. They depend on management, geology, labour, financing, jurisdictions, currencies, and hedging programmes. Any of these can fail independently of what the metal price is doing. Great Basin Gold collapsed during a period when gold was still trading well above $1,500, because the problems were operational, not commodity-related.

For this reason, most investors approach gold miners through a diversified basket rather than picking individual stocks. The most popular vehicle is GDX, the VanEck Gold Miners ETF, which holds more than 50 of the largest gold mining companies and has $26B assets under management.

The reasonable assumption is that a diversified basket should be much safer than picking individual names. And it is, relatively. But the data shows it’s still a dangerous place to hold passively.

Gold miners: the 2010-2025 reality

GDX launched in May 2006. The data in the charts below covers 2010 through 2025, to match the data published on the GoldBuzz INSIDER gold miners systems page.

Buy and hold GDX over those 16 years and you would have earned an annualised return of 4.7%. Compare that to 8.8% for gold and 9.1% for silver over the same 16-year period. (The higher 11.8% and 11.6% figures from Parts 1 and 2 covered a longer 25-year window starting in 2001.) Mining stocks, despite all their leverage to the underlying metals, delivered roughly half the return of bullion. And as we’ll see, with much worse drawdowns.

The cost was a maximum drawdown of 80.6%, from September 2011 to January 2016. Forty months from peak to trough. The 2011 peak of $58.20 wasn’t recovered until August 2025. Fourteen years underwater.

That’s the index-level experience. Holders of individual miners often had it worse. Great Basin Gold is the version of that story I lived personally but many other stocks fell 80% or more.

The 2008 financial crisis took the ETF down 71% in just 227 days. And as recently as last month, GDX dropped 33% in 18 days during the March 2026 pullback. Mining stocks remind us regularly that the volatility is real.

When miners deliver

But let’s quickly remind ourselves why we do this in the first place! The data above shows what passive ownership of miners can cost you over a full cycle. It doesn’t show what miners can do during the bullish phases of that cycle.

Over 2024-2025, GDX returned 186%. Gold returned 110% over the same period. The 76-point outperformance is the leverage working in the right direction.

2025 alone was even sharper. GDX returned 145%. Gold returned 63%. Mining stocks more than doubled the return of bullion in a single calendar year.

The 2016 recovery is another striking example. In the seven months from GDX’s January 2016 low to August 2016, GDX returned 151% while gold returned 24%. Six times the return in seven months.

This is why miners exist as an investment vehicle. The amplification that destroys buy-and-hold investors during bear phases is the same amplification that rewards them during bullish ones. The challenge isn’t whether the upside is real. It’s whether you can be in miners during the bullish phases and out during the bearish ones. That is the entire risk management problem for this sector.

A quick reminder that, to assess returns, we use the CAGR (compound annual growth rate), which is the smoothed annual return that takes the start price to the end price. To compare systems that spend different amounts of time in cash, we use the exposure-adjusted CAGR which measures what your capital is earning per year of actual market exposure. 

So what would those same simple filters from Parts 1 and 2 have done?

What’s shocking is that the three standard moving average filters (which really helped with gold and silver) do not work on gold miners.

The 200-day moving average actually lost 2.7% per year of exposure over the backtest period. The 50/200 crossover lost 3.1%. The 10-month moving average eked out a positive 1.6% but still underperformed buy-and-hold.

Now to drawdowns. The best of the three (10-month MA) only reduced the worst drawdown from 80.6% to 63.9%. The 200 DMA only got it to 74.7%.

This is qualitatively different from gold and silver, where the same filters meaningfully reduced drawdowns at modest cost. On miners, simple moving averages cost you money while leaving you exposed to losses that would still end most retail positions.

The reason is whipsaw. Gold miners are so volatile that moving average filters trade in and out repeatedly at the worst times, missing the recoveries and getting caught in false starts. Moving averages work best in smoother trending markets. Gold mining stocks aren’t smooth.

One simple filter that does work

There is one less-known approach that does help. The 55-day breakout rule, sometimes called Donchian breakout after Richard Donchian who developed it in the 1960s. The rule is simple. Buy when the price closes above its highest high of the previous 55 days. Sell when it closes below its lowest low of the previous 20 days.

Over the same 16-year period, this rule cut the maximum drawdown from 80.6% to 39.6%, roughly in half. It delivered an 8.7% exposure-adjusted CAGR while only being invested 33% of the time. Just 29 trades over 16 years, fewer than two per year.

The reason it works where moving averages don’t is that breakout systems are selective rather than reactive. The asset has to demonstrate genuine strength by exceeding a multi-month high before the system enters. Chop and noise never produce new highs, so the system simply stays in cash through the choppy periods that whipsaw moving average systems to death.

A retail investor could implement this. It’s not complicated. But the question is whether it’s enough.

What systematic risk management does

The Theseus research eventually led to the GoldBuzz INSIDER systems, and for gold miners these deliver fundamentally better outcomes than any of the simple approaches we’ve looked at in this article. That’s why I use them every day.

For example, the INSIDER Min Risk strategy posted an exposure-adjusted CAGR of 24.8% with a maximum drawdown of 36.2%. The Max Return strategy posted 17.3% with a maximum drawdown of 49.5%. The full methodology and trading profile can be read on the gold miners systems page.

The trade-off chart makes the relationship visible. The standard simple filters cluster in the lower-left of the map, with the worst drawdowns and negative returns. The 55-day breakout system sits in the middle, with the drawdown roughly halved and a modest positive return. It works better than all the moving average systems.

The INSIDER systems sit in their own region of the chart entirely, with the lowest drawdowns and highest returns per unit of exposure.

The Min Risk vs. breakout comparison is especially clean. Min Risk’s 36.2% maximum drawdown is roughly the same as the breakout’s 39.6%. But Min Risk delivered 24.8% exposure-adjusted CAGR compared to the breakout’s 8.7%. Similar risk profile, nearly three times the return.

This is the lesson of mining stocks specifically. For bullion, a simple rule gets you most of the way there. For miners, you need either a more sophisticated simple rule like the breakout system, or a properly systematic approach. Otherwise the risk is too great.

What this means

The reasons to own gold miners haven’t gone away. The numbers from 2024-2025 show what the sector delivers when the conditions are right, and the structural support behind precious metals (US debt past $39 trillion, fiat pressures, central banks themselves accumulating gold at record rates) argues that more such phases are coming. The question isn’t whether to own miners. It’s how to own them.

If you hold gold mining stocks in any form, the historical record is also clear. Buy-and-hold GDX delivered a 4.7% annualised return with an 80% drawdown over 16 years. The standard simple risk management filters all lost money during that period. One less-known approach, the 55-day breakout rule, cut the drawdown roughly in half and is meaningfully better than nothing.

For individual mining stocks, the situation is worse still. Even good companies can fail completely. Great Basin Gold is the version of that lesson I learned personally. That company is the reason I’ll never own an individual gold miner again without using a systematic approach.

Next Sunday, we close the series with a deep dive into the silver miners. See you then.

That’s all for this Sunday, folks. See you on Tuesday.

Before you go, please take a moment to rate today’s newsletter and tell us how we did.

Rick Adams
Founder, GoldBuzz
rick@goldbuzz.com