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Gold miners delivered a strong second quarter in 2026 despite a sharp retreat in gold prices from the record highs reached during the first quarter. Rising expenses and operational disruptions squeezed profitability, but annual and historical comparisons still showed an industry generating substantial cash, according to analysis prepared for the World Gold Council.

Oliver Blagden, Mine Supply Analyst at Metals Focus, said the combination of lower gold prices and higher costs placed additional pressure on producer margins after an exceptional opening quarter. Even so, the financial cushion across the sector remained considerable.

Global average producer all in sustaining costs, or AISC, climbed 8% from the previous quarter and 22% from a year earlier, reaching a record US$1,930 per ounce. That represented the 29th consecutive annual increase and reflected persistent cost pressure across the industry.

Higher sustaining capital expenditure, operating expenses and production interruptions outweighed the benefit from lower royalties. Strong cash generation nevertheless continued to support investment, shareholder returns and resilient balance sheets, according to Blagden.

Sustaining capital expenditure replaced royalties as the main force behind the increase in AISC during the quarter. Spending rose 34% from Q1 and 25% from the same period one year earlier, reaching a record level of US$441 per ounce.

The increase accounted for about 80% of the US$139 per ounce quarterly rise in AISC. Sustaining capital’s share of the industry’s total cost base consequently increased to 23%, compared with 18% during Q1’26, although the added spending was concentrated among a minority of operations.

Operational disruptions at several major mines also contributed to higher expenses. Despite those interruptions, production at the operations included in the Metals Focus Gold Mine Cost Service recovered by 1.6% from the previous quarter, while average grades improved by 1.4%.

The annual comparison was weaker. Output declined 4.4% from the previous year, while grades fell 3.1%, showing that costs continued rising even as production posted a modest quarterly recovery.

Onsite operating expenses maintained their upward march during the period. Cash operating costs increased 6% from Q1 and 18% from one year earlier to US$1,215 per ounce, while total cash costs rose 4% quarterly and 22% annually to US$1,406 per ounce.

Labour and fuel remained significant sources of pressure. Supply chain constraints also affected both the price and availability of essential inputs, with delays in securing consumables or moving equipment limiting activity and more expensive supplies raising the cost of work that continued.

Lower gold prices provided some relief by reducing royalties. Average royalty and production tax costs fell 11% from the prior quarter to US$185 per ounce, although they remained 53% higher than one year earlier.

The royalty and production tax share of AISC declined to 9.6% from 11.6% in Q1’26. That reduction was not enough to offset the broader increases in capital spending, operating expenses and costs associated with disrupted production.

The average gold price fell 7.2% from Q1 to US$4,512 per ounce. Average AISC margins therefore contracted 16% to US$2,582 per ounce, reversing some of the extraordinary expansion recorded during the first quarter.

Annual results remained strikingly strong despite that quarterly retreat. Gold prices were still 37% higher than one year earlier, while margins had increased 52%, and the average margin was the second highest in the Metals Focus dataset.

Blagden described the quarter as “a retreat from exceptional margins rather than a collapse in cash generation.” Gold prices remained elevated by historical standards, while miners continued to carry robust balance sheets despite the pressure from rising costs.

With AISC approaching US$2,000 per ounce, expensive fuel purchases and continuing inflationary and supply chain pressures were expected to sustain further cost increases. The gold price averaged US$4,266 per ounce in Q3’26, down 5.5% from the previous quarter, and stood near US$4,040 per ounce when Blagden wrote the analysis.

The combination of a lower gold price and mounting expenses set the stage for additional margin contraction through the remainder of 2026. For 2027, a forecast recovery in gold prices would increase royalty expenses, but Blagden said higher revenue should more than offset that burden, supporting wider margins and stronger financial positions.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.