Gold Miner Pulse

With graphs last updated on Nov 15, 2019
The focus of this blog page is on the gold and silver miners from a tactical point of view: how do PM miners perform relative to the price of gold or silver.

The blog page is monitoring whether trends are persisting. Therefore the graphs posted here are showing daily observations year-to-date or with a 6 months time horizon. For the long term reference frame, see the articles referenced at the bottom.

Unhedged Gold miners relative to Gold bullion

Gold breaking above $1300 again spurred enthusiasm for the miners, however after the initial rally, sentiment turned quite meek. Only gold breaking above its 4 year trading range has been lifting the HUI/Gold ratio breaking its late March high by end June and steaming up as gold firmed well above $1400. Towards end July, gold volatility started weighing on miner sentiment, though the yellow metal firmly kept above $1400, with that level becoming a support. Large gyrations of HUI/Gold are an indication of poor gold-miner correlation. Early to mid August, stock market weakness spilled over into mining stocks.  It has been an on-off story throughout Sept & October. The HUI/Gold ratio kept range bound as did the yellow metal near $1500/oz. This early Nov plunge of gold doesn't bring about a catastrophic collapse of miners.

Unhedged Gold Miners index HUI relative to gold bullion (spot market). Daily observations over 6 months - Click to enlarge
How we got there:
The last longer term review has been posted end December 2018: Precious metals mining in 2018: a dark cloud with a silver lining & 2019 outlook .

Persevering weakness of the gold price, plunging below $1200 by mid August, wore out miner optimism. Technicians didn't enjoy the inverted head & shoulders pattern very long. Late October, miners plunged, despite precious metals keeping firm.

Gold rallying to $1247 early December made miners advance substantially. Though the trend quickly reversed upon little gold weakness. The on-off game continued into 2019 with the HUI/Gold ratio unable to lock in a meaningful advance.

By January 25 gold broke above $1300 which made HUI/Gold regain its 50 dma and gold firming to $1320 by end Jan 2019 ultimately caused HUI/Gold to reach its declining 200 dma. The Chinese new year rally lifted HUI/Gold above its 200 dma. It seems ages ago we last enjoyed this situation.  While gold kept flirting with the $1300 price tag, HUI/Gold was trending higher. Thereafter everything was on the brink again. A recovery started off  on May 31st with gold rallying.

The HUI/Gold regression (previously also called 'bear market logic'): a linear but non-proportional relationship between HUI and Gold puts HUI/Gold (or for that purpose Gold/XAU) as valuation parameter in a different perspective. The HUI index has been calculated since 1996.

Global X Silver Miners ETF (SIL) relative to silver bullion

Early to mid August, broad stock market weakness completely disrupted the uptrend among silver miners. Silver above $17 seemed having become a non-issue. SIL/Silver still is way below its March & July double top. The ratio fails regaining its 50 dma and is trending lower. A bearish cross was made as the 50 dma crossed below the 200 dma. A first step to recovery now should be SIL/Silver breaking above its declining 50 dma again; we needed silver regaining $18 to achieve this.

Global-X Silver Miners ETF, SIL relative to silver bullion; Daily observations over 6 months. Click to enlarge
Remarkably this early Nov slide of precious metals -with silver back below $17- doesn't bring about a collapse of miners. Silver miners prove exceptionally resilient.

How we got there:

The last longer term review has been posted end December 2018: Precious metals mining in 2018: a dark cloud with a silver lining & 2019 outlook .

In the first half year of 2018, silver miners reacted adversely to the silver price trend. Initially silver miners had shown some resilience despite metal weakness. Yet they didn't benefit from the early October silver recovery either. With the metal lingering on below $15/Oz, silver miners lost their edge. The mid December advance mainly reflected the rally of streamer Wheaton Precious Metals. The SIL/Silver ratio turned south again, though silver broke above $15/oz.

SIL/Silver only turned up as the metal resumed its uptrend finally breaking above $16/oz by Jan 31, 2019. Silver pausing its recovery raised some doubt, yet SIL/silver broke above its 200 dma. With the metal oscillating around $15/Oz, the SIL/silver ratio curbed and then broke down again. Silver sliding further wasn't any help. As precious metals started firming on May 31st, miners rallied.

However silver miner enthusiasm remained subdued while the metal kept struggling to break above $15/Oz. Only silver finally getting traction and quickly breaking its 2019 high above $16 rejuvenated enthusiasm for silver miners. Silver miner sentiment however keeps being shaky, with SIL/Silver unable to meaningfully break above its late March top. 

Canadian Gold and Silver Mining indices
How gold miners are performing is shown by the capitalization weighed gold miners index of stocks included in the Gold Miner Pulse database (yellow diamond symbols). Note that most quotes are in CAD, which has been fluctuating to the USD. The blue graph shows the GMP silver miners index. It has been losing its edge lately.The long term depreciation of the loonie mitigated the miner loss during gold miner bear market.

GMP list based (and capitalisation weighed) gold (yellow dots), silver (blue) and equal weight (red) miners indices. Reference 1000 on Nov 19, 2010  (click to enlarge)
The third index added uses equal initial weights of all (silver and gold) miners from the GMP database. Because of its simple weighting scheme, comparing this index to the capitalization weighted indices gives a fair idea of how junior miners and explorers fare as compared to the large miners.
How we got so deep into trouble is best illustrated when showing a long term graph of those capitalization weighted miners indices. The revival after late Jan 2016 healed the last leg down of the miner bear market. We briefly topped the May 2013-Oct 2014 trading range.

Long term graph of the GMP list based (and capitalisation weighed) gold (black), silver (blue) and equal weight (red) miners indices. Reference 1000 on Nov 19, 2010. - Data till Dec 29, 2017 (click to enlarge)

The silver miners index rose till 1400 in April 2011, peaking three weeks earlier than did the silver price. The silver miners index also posted a higher maximum during both the March 2014 and June to early August recovery than it did in the August 2013 recovery. The gold miners index and the equal weight index did not peak higher at any of the failing 2014-15 recoveries than they did in August 2013. By January 2016 silver miners nearly completely lost their edge relative to gold miners, yet the recovery proved more vigorous. The below long term graph covers over three years: the end of the bear market with miners bottoming by Dec 2015, the 2016 boom-bust over the tedious months early 2018, with miners unable to match gold strengthening. Miner quotes were jittery after gold plunged below $1200. Towards end 2018 gold strengthened to $1280 with miners recovering timidly.

Mid/Long term graph of the GMP list based (and capitalisation weighed) gold (black), silver (blue) and equal weight (red) miners indices. Reference 1000 on Nov 19, 2010. - Data till  Nov 8, 2019 (click to enlarge)
Performance graph
There is an important performance disparity among the gold and silver miners of the GMP database. Many laggards still seem moribund. The median (or middle) miner (with an equal number better and worse) is losing 62.3%: more than a doubling is needed to break even. The average loss posts at 33.7% as the performance distribution is slanted towards the high gains.
GMP Miners sorted by loss to gain since inception on Nov 19, 2010. Click to enlarge
There are 13 miners/explorers losing 90% or more, with 3 thereof down over 95%. At the opposite side 17 miners are quoting above their Nov 2010 mark, led by Kirkland Lake; 7 stocks have doubled. The top 5 miners are omitted in the above graph to avoid excessive scale expansion, but you find the top-15 in full detail below:
GMP elite miners, sorted by gain since starting observations in Nov 2010 using a logarithmic view with minor ticks 10% apart in the bottom decade and 100% apart in the next decade - Click to enlarge
A more detailed analysis including list composition changes, is found on the page "miners performance". The miners included in the database are classified in five performance quintiles. This allows evaluating how individual miners went with the herd or against the grid.

The contributor driven explorer and (junior) mining spreadsheet

Pooling efforts with any cooperative peers out there, I started the “contributor driven explorer and junior mining spreadsheet” end 2011. The idea is to get a selection of explorers, junior or mid-tier producers of gold and/or silver. This spreadsheet is updated weekly. Sector benchmarks (ETF's) were added since the very start.

Related blog articles

Several more detailed articles focusing on the longer term have been published. These are using the same approach as this blog page and still are a good read to grasp the historic perspective:
  1. Miners relative to precious metals: a tactical approach; (July 2, 2012)
  2. Miners relative to precious metals: An update on 2012;  (Jan 13, 2013)
  3. Anatomy of a gold miner bear market (Dec 30, 2013)
  4. Three year slide of precious metal miners (Dec 31, 2014)
  5. Gold miner bear market starting its fifth year (Jan 3, 2016)
  6. Precious metal miners relative to metal prices (Dec 31, 2016)
  7. Precious metal mining in 2018: a dark cloud with a silver lining and 2019 outlook (29 Dec 2018)
  8. Gold Miner Pulse 2019 (half-year update) (1-07-2019)
During 2011-15 and even over the long haul, the relative performance of mining majors to the precious metals they produce was disappointing for major gold miners, even while the metals were in a solid uptrend.  See: Gold miners: three decades for naught or Decades of underperformance

Remarkably, during the gold miner bear market and it subsequent recoveries till summer 2017 the HUI - gold relationship followed a linear regression. Thereby the HUI slides dis-proportionally during any gold decline, but also shows the expected leverage at a gold advance. See for example: Linear Regression between the Gold Price and the HUI miners index (April 2017)
In 2018 it became obvious that the HUI once more started lagging this observed relationship.