The term "gold stocks" simply refers to companies involved in the gold mining process. And, generally speaking, there are three types of gold stocks:

Miners: Gold miners are companies that are actually involved in extracting gold out of the earthKolkata Investment. Miners typically develop a mining facility, mine the gold – which involves extracting ore and then processing it into gold – then sell the metal to buyers, who will use the gold to make anything from coins and bars to jewelry to electronic components.

Junior miners: Despite the term "miners," junior gold miners don't actually mine for anything. They're exploration companies that search out potential gold deposits and determine feasibility of the mines. Gold miners then buy these assets from the juniors – and from time to time, they'll buy the junior firms outright.

Royalty companies: Royalty companies never get anywhere close to physical goldSurat Stock. Instead, these firms provide financing to miners, who in turn agree to pay the royalty company either a percentage of revenues or gold production.

In all cases, the price of gold has a lot of sway on how these stocks perform. High gold prices mean higher selling prices for miners, higher deposit sales prices for junior miners, and higher royalties for royalty companies.Simla Investment

In fact, the metal's price impacts gold stocks' financial situations so much that miners' share prices tend to trade much more drastically than the metal itself. And given that juniors are typically a much more high-risk, high-reward proposition than actual mining companies (which also tend to be larger), juniors typically trade in an even more exaggerated fashion.Udabur Stock

One of the clearest illustrations of this: 2016, when gold prices rose for a half a year before pulling back.

This dynamic exists for better or worseAhmedabad Investment. Consider this Goldman Sachs observation about gold miners from late 2023: