Precious metals have been weakening all summer and the slide aggravated in September. We probably have seen the bottom on Monday. The last week of September, precious metals have been recovering.
Miners had been butchered, with the HUI index dipping below 173 on Monday Sep 26, to close at 175.7. This is the worst slide over two consecutive quarters since 2013-Q2 and Q3.
The Gold Miner Pulse page and Miners' Performance page have been updated with end-of-quarter data.
In the remainder of this article, I you find a year-to-date review.
Gold miners relative to Gold (USD/Oz)
The HUI (basket of unhedged gold miners, quoted on US exchanges) is used as a benchmark. The ratio of the HUI relative to the gold spot price gives a fair idea of how miners are doing.
HUI: Gold ratio, daily observations year to date. Blue and red lines add a 50 days and a 200 days moving average.
Not only has gold slid from a peak above $2000 shortly after the Ukraine invasion, its price in USD/Oz has plummeted to the lowest level since the March 2020 corona dip. Against the background of peak-inflation this may seem outrageous. The main culprit for the slide is the USD strength relative to a basket of major world currencies (mainly EUR, YEN, GBP). The FED has been leading the rate hikes to help reduce inflation towards its long term target, which is the main driving force behind the USD rise.
Miners did even worse, having lost almost half of their value since the peak in the summer of 2020. Gold in USD has lost less than 20% in the mean time. But due to USD strength, the yellow metal is near its all-time-high in many currencies.
Inflation has nevertheless eroded the margins of most gold miners, albeit after they peaked to a level not seen since 2011. This has stirred up the negative sentiment with the above result.
Silver is rarely a safe harbour in such circumstances. The Global-X silver miners ETF, with symbol SIL is used as a benchmark against the silver price. Silver has slid from a peak at $30/Oz in 2020 to well below $19/Oz last week. This is a near 40% plunge. Miners gave way more, but not to the tune of the relative loss incurred by gold miners. Silver miners usually have a varied output of precious (silver, gold) and base metals (copper, zinc, lead). Though industrial silver demand might suffer during a deep recession (that is at least what speculators assume), investor demand for bullion has remained strong, with mints unable to keep up.
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| SIL : Silver (USD/Oz) ratio, with daily observations year-to-date. |
Unlike for gold, there has not been a well pronounced peak valuation during spring. Silver miners have slid pretty much throughout 2022. The late September trough was quite harsh.
Mid to long term (3+ years) of the gold miners indices
The gold miner pulse page posts a graph of these list based indices over about one year. The below graph opens up the horizon to July 2019, when gold was recovering from its post 2011 bear market.
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| Our Gold-Miner-Pulse list based indices for gold and silver miners (19 Nov 2010 = 1000) |
Both in Mar 2020 (Corona-plunge) and late Sep 2022, the capitalization weighed gold miners index dipped below 400, implying a 60% loss since the start of observations in Nov 2010. Despite their lackluster performance over the last year, the long term performance of silver miners is better than that of gold miners. There have however been a few acquisitions which have boosted past performance. The sector is quite narrow, yielding large individual weights for some miners.
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