As investors and pundits debate the true depth of America’s inflation problem, gold miners are sending a stark message: stagflation may already be here.
That’s according to Otavio Costa, a macro analyst and portfolio manager, who noted this week: “Gold stocks have crushed every sector of the S&P 500 this year.”
In his view, the market’s behavior is a textbook case of stagflation.
Classic stagflationary behavior:
undefined Otavio (Tavi) Costa (@TaviCosta) September 10, 2025
Gold stocks have crushed every sector of the S&P 500 this year. pic.twitter.com/bKiXTZUNsD
The numbers back him up. Gold prices have surged between 35% and 40% in 2025, while the NYSE Arca Gold Miners Index has soared nearly 90% year to date. Both have far outpaced the S&P 500’s roughly 12% gain.
Gold’s rally has been fueled in part by waning confidence in the U.S. dollar and expectations that the Federal Reserve will cut interest rates in an inflationary environment. Investors, wary of eroding purchasing power and policy missteps, have poured into haven assets such as gold.
Historically, stagflationary environments — marked by sticky inflation and weak growth — have favored gold and gold stocks, while most other sectors struggle.
Recent economic revisions have added to those concerns. The Bureau of Labor Statistics (BLS) acknowledged this week that U.S. job growth was overstated by about 2 million over the past three years, undermining confidence in the strength of the labor market.
Economist Peter Schiff has gone further, warning that the U.S. is “on the cusp of the greatest stagflation in history.”
Similarly, The Kobeissi Letter, a widely followed markets newsletter, wrote this month: “Stagflation is here,” citing soft labor data and the likelihood of imminent Fed rate cuts.
In 2 weeks, the Fed will cut rates and undefinedblameundefined a weak labor market.
undefined The Kobeissi Letter (@KobeissiLetter) September 2, 2025
The US unemployment rate for 16-24 year-olds is up to 10%.
The labor market is weakening into rising inflation.
Stagflation is here.
Follow us @KobeissiLetter for real time analysis as this develops. pic.twitter.com/uqIJcsFATt
Fed caught between a rock and a hard place
The Fed is facing mounting pressure on two fronts: political interference and flawed data.
Central bank independence has come under renewed scrutiny as the Trump administration pushes to reshape its operations, including exerting greater influence from the executive branch.
Policymakers were widely criticized in 2022 for waiting too long to raise interest rates. Now, with mounting pressure in the labor market, they face similar criticism for waiting too long to cut them.
Complicating matters further, the Fed relies heavily on data from the BLS, which has proven deeply problematic and unreliable. Significant revisions to payroll data have led some analysts to argue that earlier calls for aggressive rate cuts were justified
James E. Thorne, chief market strategist at Wellington-Altus, says the issue goes deeper than any single policy call.
“The Fed’s story is a tragic comedy of missed opportunities and stubborn blindness,” he wrote. “Here we have an institution stuck in the 1950s, clinging to outdated models and old-school thinking [like] archaic reliance on BLS data and outdated policy.”
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