Gold Miner Pulse

With graphs last updated on Jul 13, 2018
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

Miners ignored the year-end gold rally, bringing the metal back above $1300. January brings more surges and swoons. Mining stocks lagged gold, both during the January uptrend as throughout the ebbing and flowing of the gold price later on. HUI/Gold has found its bottom after a lengthy downtrend. it now has firmed to 0140, despite the yellow having slid to $1240, thereby equalling its December 2017 bottom.

Unhedged Gold Miners index HUI relative to gold bullion (spot market). Daily observations over 7 months - click to enlarge

How we got there:
Since Jan 2017
Gold started off 2017 with a substantial recovery while HUI/Gold rallied. The yellow metal gradually continued strengthening, but sold off after mid February. The mid April and mid May recoveries were anticipating higher gold prices, but they rolled over as gold failed to break the $1300 resistance level. Miners are progressively lagging gold, even as the yellow metal again progresses during summer.

The triangular pattern with lower highs broke to the upside towards end July. Despite gold rallying and peaking above $1350 early in September, the miner's advance was not convincing. HUI/Gold only shortly broke above 0.16.

The yellow metal sliding and bottoming convinces mining investors that the correction will be short and shallow. But gold regaining once more $1300 provides another trigger to hit the sell button. The pendulum goes on.

By end October HUI/Gold slid below 0.145 upon gold recovering! That 'resistance level' held till the last week of November: with gold weakening below $1250, HUI/Gold plunged below 0.140 early December. HUI/Gold started recovering with some initial hesitation and a follow through before Christmas. However, miners ignored the year-end gold rally, bringing the metal back above $1300. January brings more surges and swoons. On Feb 16, HUI/Gold posts at 0.1364, still beneath its Dec 2017 low. Mining stocks first lagged the gold uptrend then were plummeting beneath their Dec low and now once more lag the gold price ascent, with the yellow metal near its January high.

Recently the HUI/Gold regression (previously also called 'bear market logic'): a linear but non-proportional relationship between HUI and Gold has been described, which 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

Lately silver miners have been reacting adversely to the silver price trend. Eventually silver regaining $16 today is no longer met with disbelief. Yet nothing ever is certain with silver miners.

Global-X Silver Miners ETF, SIL relative to silver bullion; Daily observations over 7 months. Click to enlarge

The low range max-min on the vertical axis proves SIL/silver to be less shaky than what the graph suggests. It also overemphasizes the day-to-day variations.

How we got there:
Since Jan 2017
Silver started off 2017 with a substantial rally. At its peak, the white metal was now up 16.6% YTD, Miners were strengthening especially the first week of January. Early March, SIL/silver bottomed at 1.9 upon silver breaking below its $17 support.

Despite silver again sliding till May 10, miners have been exceptionally resilient, with SIL/Silver firming. However miners lagged as the precious metal recovery unfolded and rolled over when precious metals retreated. Any recovery attempt has broken over the last few months. The SIL/Silver ratio seems setting down higher lows, though silver has been lagging gold,. The Au:Ag ratio was creeping up, after the metal broke below $16 during the second week of July and as we entered August, that ratio is again surpassing 75. By end July, silver miners started leveraging down weaker metal prices, with silver miners losing their edge. After bottoming mid August, SIL/silver broke above its 50 dma with silver firming.

Despite silver briefly regaining $17, the late september recovery of SIL/silver has faltered and silver miners aggravated their slide. Did we ultimately see a bottom on Monday Nov 20? Despite silver sliding below $16 early December, the worst seemed over. Silver regained $16 with miners responding timidly. SIL/Silver kept steady till christmas.  Yet likewise for gold, silver miners first ignored the metal recovering. The mid January silver miners rally didn't get legs: SIL/Silver is slid to its Nov 2017 low at 1.78 as the white metal struggled to uphold $16. Unlike for gold mines, some improvement may have taken root, with SIL/Silver nearing its 50 dma.

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 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.

The mid June level shift of the equal initial weight index is caused by a friendly take-over bid of the Australian South32 miner on Arizona Mining (AZ). Since years AZ mining has been the top performer of our GMP database. This tenbagger nearly adds another 50% to its stellar performance. This level shift compensates for much of the lagging of this index compared to the silver mining index over the course of 2018.

How we got so deep into trouble is best illustrated when showing a long term graph of those capitalization weighted miners indices. It also puts both the short-lived August 2013 and past March and June 2014 and Jan 2015 miner revivals in perspective. 
The revival since 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 till now with miners showing resilience despite the gold slump.

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 Jun 29 2018 (click to enlarge)

Performance graph
There is an important performance disparity among the gold and silver miners of the GMP database. Too many laggards seem moribund. The median (or middle) miner (with an equal number better and worse) is losing 62%: doubling doesn't bring you to break even. The average loss posts at 31.3% as the performance distribution is slanted towards the (few) high gains.

GMP Miners sorted by loss to gain since inception on Nov 19, 2010. Click to enlarge
There are 14 miners/explorers losing 90% or more, with 10 thereof down over 95%.  At the opposite side only 12 miners are still quoting above their Nov 2010 mark, led by Arizona Mining; 4 stocks have doubled. Those top 4 miners are omitted in the above graph to avoid scale expansion, but you find the top-10 in full detail below:

GMP top performing 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;  AZ Mining needs another decade to be started with gains from 1000%-2000% - 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 down with the herd... or withstood the tempest.

As announced previously on the gold miners' performance page, Primero Mining and Klondex Mining have left the selection. Primero has been delisted after its acquisition by First Majestic, while Klondex is being acquired by Hecla Mining, though the deal is not yet finalized. Newcomers are Auryn Resources (having doubled since the Nov 19, 2010 reference date) and Riverside Resources: among the mid-range miners down about 64%.

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)
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

While these blog articles had a time perspective covering years or decades, the present blog page is monitoring whether the trends observed are persisting. Therefore the graphs posted here are showing daily observations year-to-date or with a 6 months time horizon.