How The Soaring Price of Gold Will Reshape Mining

Gold has surged past US$5,000 per ounce for the first time in history, cementing its role as the ultimate safe-haven asset amid escalating geopolitical and economic uncertainty.

For the mining sector and procurement teams, this is a material cost shock that is reshaping sourcing strategies, supplier negotiations and risk management frameworks.

Global instability – including trade tensions, tariffs and ongoing geopolitical conflicts – has heightened demand for precious metals. Investors are increasingly turning to gold and silver as protection against market volatility, driving prices to unprecedented levels.

Silver has followed a similar trajectory, recently climbing above US$100 per ounce, up nearly 150% over the previous year.

Why gold prices are soaring

Several factors are driving this record surge. Geopolitical tension and trade risk are primary drivers, as disputes between major economies, potential tariffs and policy uncertainty are prompting investors to hedge against risk.

Economic factors are also at play. Elevated inflation, a weakening US dollar and expectations of further interest-rate cuts by the Federal Reserve are pushing demand for tangible assets. Furthermore, central bank buying continues to maintain upward pressure on prices as nations diversify reserves into gold.

Finite supply remains a critical issue for the industry. Only around 216,000 tonnes of gold have been mined in history, with just 64,000 tonnes of estimated underground reserves remaining, making new extraction increasingly costly and complex.

Analysts, including Natasha Kaneva at J.P. Morgan, spoke towards the end of 2025 about this become true, but it is ahead of schedule: "The long-term trend of official reserve and investor diversification into gold has further to run. We expect gold demand to push prices toward US$5,000 per ounce by the end of 2026."

Natasha notes that J.P. Morgan Global Research forecasted prices to average US$5,055/oz by the final quarter of 2026, rising toward US$5,400/oz by the end of 2027.

Mining sector responds with strategic consolidation

The rising value of the gold mining sector has seen Zijin Gold, one of the world's largest gold miners with operations across nine countries, reach an agreement to acquire Allied Gold, valued at approximately US$4.01bn (C$5.5bn). The deal secures a portfolio of long-life, high-quality assets in Ethiopia, Mali and Côte d'Ivoire.

Rising gold prices have strengthened miners' profit margins and cash generation, driving industry consolidation as major producers pursue acquisitions to secure long-lasting assets and increase production instead of building new mines.

Hongfu Lin, Chairman of Zijin Gold, says: "The acquisition expands our presence in Africa and provides multi-decade production potential. These assets are consistent with our strategy of acquiring high-quality gold resources."

Hongfu and his team believe that for procurement and supply chain leaders, such consolidation underscores the importance of long-term sourcing strategies. Reduced supply flexibility and increased pricing power amongst miners make hedging, supplier diversification and alternative material planning essential.

A structural challenge for teams worldwide

The implications are immediate and significant. Gold's surge is driving inflated costs across multiple categories, particularly in electronics (connectors and wiring), aerospace plating and medical components.

Many suppliers are now seeking price pass-throughs or contract renegotiations, while fixed-price agreements risk eroding margins. Category managers are advised to act quickly to mitigate exposure through hedging strategies, using forward contracts and dynamic pricing clauses to protect against volatile commodity prices.

Gold's historic rally is more than a financial headline – it is a structural challenge for teams worldwide. To navigate this environment successfully, organisations should map exposure across categories to identify products and contracts with embedded gold content and quantify spend risk.

It is vital to coordinate with finance and treasury departments to explore hedging strategies, forwards and dynamic pricing mechanisms. Furthermore, teams must engage suppliers early to negotiate pass-through clauses and contingency plans to manage cost pressure.

Finally, the industry must accelerate recycling initiatives. Investing in reclaiming gold from e-waste or scrap materials to offset rising costs is becoming essential. Organisations that respond swiftly with strategic sourcing, risk management and innovative cost-control measures will protect margins, maintain supply resilience and emerge stronger in a volatile commodity landscape.