Gold Miner Pulse - Friday March 13

With graphs last updated on Mar 13, 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. 

I like to 'isolate' this version from the thread of weekly updated blog pages. The abrupt reversion of the gold bull trend and the implosion of all 'white precious metals' indeed is a sudden discontinuity deserving its place in history.

Whereas on Friday, stock markets enjoyed a bear market rally after the corona virus frenzy caused a worldwide slide, precious metals continued their downward spiral. Miners were slaughtered. Not only they had been retreating with common stocks while precious metals upheld or even advanced, now miners again leverage down the precious metals decline. From 52 weeks high to fresh 52 weeks low in little over a fortnight.

Selecting Precious Metal Miners and Explorers

Searching for excellence

Precious metal explorers as investment vehicles have a long standing track record of extreme volatility. As Rick Rule of Sprot Asset Mgt. USA uses to formulate it: “We have known both the thrill of victory and the agony of defeat”.

It is obvious that the success of precious metal explorers goes together with both the exploration talent of a small team of geologists and with their broader management skills. Add just a grain of luck in picking among the promising geological anomalies the successful drilling locations. To end this introduction with another quote of Rick Rule: “Profitable miners ultimately will see their share price reflect increased cash flows from mining operations, but you can’t count on a gold bull market to bail you out of a dumb decision on an explorer investment.”

Gold Stock Analyst Investor Day

Gold StockAnalyst (GSA) is the market's most respected and successful source of insight and guidance for gold stock investors. The title of GSA's flagship newsletter — GSA Top10 — also sums up its unique investment approach that has an amazing — and verified track — record. Future results cannot be guaranteed, but we promise the GSA Top10 is unlike any stock research you've ever seen.

GSA has been founded by John Doody, an Economics Professor for almost two decades. Doody became interested in gold due to an innate distrust of politicians and concern over their habit of debasing the currency via inflationary economic policies. Other than the Top10 list, John Doody also publishes a full coverage GSA_PRO list covering a universe of about 60 gold miners and developers (near producers). Pure exploration is out of scope. Since 2012, there equally is a Top5 silver miners list (only 5 since there are fewer to choose from).

Long term performance of Gold Miners

Previous few postings have warned against betting on leverage when investing in gold mining stocks. Miners occasionally outperform when gold rallies really get traction. They sometimes prove a decent investment when a substantial number of influential investors are convinced that the bottom is in for the gold price. However, miners more often lag the metal while it's rising or slide precipitously upon gold weakening.  The focus now shifts to statistics on individual miners: both success stories and horrendous nightmares.

Linear Regression between the Gold Price and the HUI miners index

As gold has broken above its $1300 resistance, enthusiasm for the miners is still at the back-burner. We are miles away from the collective euphoria witnessed only little over a year ago.

Graphs were updated on Oct 10, 2017.

Elite miners and explorers ... or what's left of them

Since almost five years, I've been monitoring how the precious metal miners and explorers covered in the Gold Miner Pulse database fluctuate up and more often down. From a majority of gains over losses few months after the start in Nov 2010, we have evolved to only five long term gains left.

Brutal end of a nascent gold miner recovery

We 've witnessed a nascent precious metal miner recovery since June 27, as miners have started recovering even before gold found its final bottom below $1200 in the morning of June 28. For as long as the stealth gold rally had legs, miners responded favorably. The gold rally was petering out the week after last posting:
The stealth gold recovery rally. Gold has been sliding from July 29 onwards. Despite a small technical recovery last Friday, the gold slide aggravates. Whenever there is some rumor out about "tapering" the QE3/QE4 bond purchase programs of the FED, hell breaks loose.

The hard life of a mining investor

Mining Shares versus Precious Metals

The precious metal side

Investing in precious metal bullion is relatively easy: you have only two (or three including platinum) metals to choose from. Coins or bars makes little difference: the premium is higher the smaller the item.
Precious metals investing in the larger sense may turn out to be more difficult or treacherous.

Miners relative to precious metal prices: a tactical approach

Approach

The focus of this blog article is on gold and silver miners from a tactical point of view: how do PM miners perform relative to the price of gold or silver.  Since the start of the gold bull, did precious metal miners by far outperform the gold and silver they produce?

For nearly eight years they surely did. Gold miners shown are represented by the HUI, ticker symbol for the AMEX "basket of unhedged gold stocks". The graph below shows both the HUI index and gold bullion; further down the characteristics shown is the HUI/Gold ratio, giving an obvious idea on how cheap or expensive gold stocks are relative to bullion.

Miners continue their downward spiral

Precious metals miners are unable to change momentum: despite a recovery of both the gold and silver price on Maudy Thursday (April 5), both our GMP-list based indices continued their slide, with a third consecutive low for the gold miners index. The silver miners index also sets down a fresh low, however the previous one dates back to Dec 28, 2011. No better news for the equal weight index – which is a decent proxy for the junior performance – with equally a fresh low since Dec 28, 2011.

With the cap-weighted gold miners index now at 723, the index has shed 27.7% since it started off on November 19, 2010. Over the same time frame, gold is up 21.6%. The silver miners index lost 19.4% over this time frame, however silver rose 30.8%. (See also the graphs on the blogpage in http://gwyde.blogspot.com/p/gold-miner-pulse.html)

The situation hasn’t improved at all in 2012: with gold still up 4.1% year-to-date (despite repeated sell-offs) and silver up 13.9%, the gold miners index lost 11.2% and even the silver miners index is down 4.5%.

Selecting explorers and junior miners

Searching for excellence

Precious metal explorers as investment vehicles have a long standing track record of extreme volatility. As Rick Rule of Sprot Asset Mgt. USA uses to formulate it: “We have known both the thrill of victory and the agony of defeat”.

Miners' performance relative to precious metals

Abstract
The focus of this article 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. Data used are 2012 Jan 10.
Special attention is paid to the miners covered by the database 'Canadian gold and silver mining', for which a capital weighted index of gold- and silver miners is calculated. Aggregated performance is one thing, it's also very illustrative that miner and explorer performance has been diverging from outperforming the metals by a wide margin to losing ground completely.

Canadian gold and silver miner performance

Valuation data for a representative list of Canadian gold and silver miners and explorers are maintained on the Gold Miner Pulse site (GMP). On the dedicated ‘Gold Miner Pulse’ page of this blog the performance of the HUI unhedged gold miners index is shown relative to gold bullion. It doesn't look nice: nor over the short term nor over two years, even since the aftermath of the secular financial crisis. In another graph the performance disparity is illustrated among the gold and silver miners of the GMP database. Some lucky picks have been outperforming silver or gold by an impressive margin. Few laggards have lost tremendously despite gold and silver up considerably over the year. A disappointing majority of 61 precious metal miners are in the red since Nov 19 last year. Little individual miner information can be conveyed in one such graph. Therefore, I 'm going into detail to give an idea which miners were good picks and what are the investor's nightmares.

A first analysis in this sense was made in August (See: Stock picking matters).

Over three months later, the performance disparity has only grown, especially near the bottom of the list, though there have been few shifts among miners and explorers in the bottom quintile.

Junior gold miners and explorers lagging majors

On the gold miner pulse page of this blog, I have been pointing to the dramatic underperformance of juniors in the brutal miners swoon caused by the recent severe gold correction.

Since early April, junior miners ceased to outperform mining majors. Juniors nor majors were able to keep up with the pace of the gold price rising during summer. Whereas miners withstood a first pull back of the gold price rather well, the correction in the second half of September turned out to be dramatic. Junior miners and explorers paid a high price and much of their advantage over major miners is melting away. 

Junior miner performance on that blog page is measured using the MVGDXJ index. That index is going back to end Dec-2003 and offers a relatively long perspective when compared to the GDXJ Etf itself.

Stock picking matters

On the Gold Miner Pulse page a graph is shown where the performance disparity is illustrated among the gold and silver miners of the GMP database. Some lucky picks have been outperforming silver or gold by an impressive margin. Few laggards have lost considerably despite the gold and silver bull market; moreover a disappointing majority of 63 precious metal miners are in the red over nearly nine months.