Gold Nears $3,000 But Miners Struggle As Rising Costs Squeeze Profits

While gold continues to climb toward its historic milestone of $3,000 per ounce, propelled by the escalating tariff wars, gold miners have lagged this success. Rising labor costs, foreign government pressures, and inflation are squeezing profitability, raising questions on whether they can catch up.

Gold's recent performance has been stellar, as the precious metal gained 27% in 2024 and over 11% in the first six weeks of 2025. However, mining equities have not kept up the pace.

Top majors Barrick GOLD and Newmont NYSE: NEM) reported disappointing third-quarter earnings, as all-in-sustaining costs (AISC) rose by 20% and 13%, respectively.

"Labor remains one of the substantial expenses for miners, and we expect the inflation story to continue playing out over the next year or so," Sarah Tomlinson, director of mine supply at Metal Focus, noted for Reuters.

In Australia, a major gold-producing country, the Albanese government's "Same Job, Same Pay" legislation has increased wages for mine workers. The policy, which came into effect last November, ensures that temporary workers receive the same pay as permanent employees performing the same job.

Thus, 120 workers in New South Wales mines saw annual wages rise by up to $22,000, with another 1,500 workers likely to benefit from similar adjustments. While this policy promotes wage equity, it has added to miners' cost burdens, particularly in an industry grappling with labor shortages and declining interest in mining careers.

Rising gold prices have also driven governments' interest in boosting royalty participation within their jurisdictions. The military-led government has introduced new royalties and tax demands in Mali, Africa's fourth-largest gold producer. The government has increased its share of mining revenues and ordered Barrick to pay back hundreds of millions in taxes and dividends.

In turn, this had a double-whammy impact: effectively, it drove down the country's production—which fell by 23% in 2024—while making operations there less profitable.

Still, the gold mining industry has been grappling with rising AISC for years. Since 2016, the average AISC has climbed steadily, driven by higher energy, materials, and labor costs.

In 2022, AISC reached a record high of $1,276 per ounce, up 18% year over year, per IBIS InGold.

Despite producer cost pressures, gold's long-term outlook remains strong. Sabrin Chowdhury, head of commodities analysis at BMI, expects it to continue outperforming other metals.

"Gold is benefiting strongly from economic and geopolitical risks, and we expect it to remain elevated," Chowdhury recently noted, highlighting central bank buying, trade tensions, and FED's rate cuts as supporting factors.

Read Next: