Miners once more started lagging before gold peaked

Miners once more started lagging before gold peaked? You read it right ! They did. With the benefit of quantitative analysis: the linear correlation between the HUI miners index and the gold price this bold statement is corroborated.

Crude data

The larger perspective

The Gold Miner Pulse page has recently been updated. The HUI to Gold ratio (first graph) is surprisingly low for gold quoting near $2600/oz. In fact we are at the same ratio last seen in April, when the yellow metal quoted around $2300/Oz. Remember a 'high' ratio implies miners relatively expensive compared to gold, while a low ratio means they are relatively cheap to gold.

However what 'expensive' and 'cheap' really mean has been shifting dramatically over time. During the first gold bull market of the 'nillies' the HUI used to quote at about half the price of gold (then several hundreds of dollars per ounce rather than a few thousands). Now we are elated when the HUI index gets close to 15% of the price of gold.

Recent data

Over the last few weeks, gold peaked (on a NYMEX close basis) at $2787 on Oct 30. The metal is down 5.9% from its peak on Dec 20 (the Friday before XMas): before trading becomes thin and erratic.

The HUI is down 23% from its peak (363.9) since 2020 which however it reached on Aug 5, 2020 with gold quoting at 'only' $2039.5/Oz. On a recent maximum the HUI closed at 354.2 on Oct 22 with gold closing at $2748.4. As gold peaked on Oct 30, the HUI closed lower at 331.7.
 

The end of the latest linear regression 

Using the parameters of a linear regression, the HUI can be drawn together with the gold price on the same graph, whereby the right axis for the HUI is made to fit the linear regression dependence on the gold price. More about such linear regression in the previous article: Will miners ever cease lagging gold? 

The below graph is extending previous graph with data limited to end June 2024. We observe that all went well until after the third quarter. October brought a first warning sign, however the HUI recovered its 'loss' relative to gold at near its peak on Oct 21 and 22. Miners progressively lost steam afterwards and were unable to keep up with the gold price or slid disproportionally at any gold correction.

Just one single graph shows it all:

Gold on the left axis (in red) versus HUI on the right axis (in blue)

All went well till September. But by Dec 20 the HUI is down 49 points below its expected 'regression value'. The HUI is now quoting as if gold were just below $2400/Oz. Down to 280, the HUI index is unlikely to ever reach its 'regression curve' again. Once more a window of opportunity is closed, which was allowing any mining investor to lighten up on his positions, selling either at a lower loss or a higher profit.