Valuation trend of gold mining equity relative to gold

This subject has been treated in depth on multiple occasions on this blog channel. The current article is merely an extension illustrating the trend over the last 12 months.

Miners are getting traction

Even after the start of the gold rally in the spring of 2024, miners response has been lackluster. Miners only started to get traction well into 2025 after the yellow metal had breached the $3000 ceiling.

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.

Will miners ever cease lagging gold?

Last year a nascent regression between gold miners (using the HUI index of unhedged gold miners) and the yellow metal seemed to interrupt the unabated miner slide relative to gold.

Are miners locking in a linear regression to the gold price?

A nascent regression between gold miners (using the HUI index of unhedged gold miners) and the yellow metal may finally interrupt the unabated miner slide relative to gold.

Permanent impairment of precious metal miners to the price of the metal

Miners not only fail to hold on to the elevated precious metal prices, over the long haul they gradually are lagging more and more. Since this holds for the majority of miners, both large caps and smaller miners, you cannot diversify away any specific mining risk.

The July Miner crash

 International tension culminating in the outbreak of the Ukraine war, caused precious metals to spike by end February and the beginning of March. The hesitant first rate FED hike didn't really alter the outlook for the yellow metal. With the benefit of hindsight this was a peak level, hence an ideal exit moment.

Miners index (HUI) to gold regression impaired.

The linear regression between the HUI miners index and the gold price which was valid since Aug 2018, has come under severe strain since last summer. Permanently negative residuals are a clear statistical indication that the linear relationship is seriously impaired.

Oversold miners; Lagging gold

The yellow metal peaked in August 2020 at an all time high, with miners following in the slip stream. While little over one year later, gold is less than 15% off its peak, miners are oversold and lagging gold.

Gold miners regain their regression trend line

Since the summer of 2018, the HUI gold miners index has been following a regression trend line relative to gold. The emerging trend was first described in September 2019 and confirmed last year.

Miners (HUI) to gold linear regression still intact

 A year ago the new linear regression between major gold miners (represented by the HUI gold miners index) and the gold price has been revealed. With the yellow metal now way above the interval used to derive the regression relationship, it has been verified that the linear regression still holds.

Miners now anticipating $1800 gold

The gold price keeps rising early July 2020 towards the symbolic $1800 mark. After a flawed and weaker period since mid May, miners are again responding favorably to the ongoing gold rally, now anticipating $1800 gold, that level being breached while editing this blog !

Revival of gold mines - Corona dip overcome

Gold mining investors were shaken as stock markets tanked and subsequently precious metals dipped at the outbreak of the Corona pandemic: miners suffered a double whammy. The recovery last two months has been vigorous, with tailwinds from both a gold price rally and the (FED) liquidity driven selective stock market recovery.

Precious metal and miner 2019 overview and outlook for 2020

Best wishes for 2020

This blog article is monitoring the trends over a 6 and over a 12 months time horizon. Therefore the graphs posted here are showing daily observations year-to-date. For the very long term reference frame, see the articles referenced at the bottom.

New linear regression between the HUI miners index and the Gold Price

Price trends of individual miners are correlated with the gold price. On an aggregated level, a linear regression between the HUI gold miners index and gold may for hold several years. Presently, an emerging linear regression is revealed, fundamentally different from what was observed before.

HUI to Gold Regression: the 2008-10 recovery

What happened to stocks during the 2008 financial crisis needs little explanation. Whereas the broad stock market kept meandering along the lows till March 2009, gold recovered very quickly.
US Government bailouts such as TARP (Troubled Assets Relieve Program) abruptly doubled the money supply. The FED medicine to ease the pain in the broad economy undermined faith in the dollar and raised fear for an escalating inflation.

HUI to Gold regression revisited

During the gold rally which took us from below $280/Oz by end 2001 to $1000 in March 2008, we were repeatedly told that the HUI miners index fluctuated around half of the price of gold (in USD). It was a trading rule which wasn't really questioned in depth and it seemed to hold for several years.

Miners will continue to disappoint

Last Friday we witnessed a magnificent miner rally as gold broke above $1300 for the first time since mid June 2018.  However, miners have been disappointing for most of the past 18 months. There is no obvious reason why this dire situation would suddenly improve. 

Miners once more lagging precious metals

The Randgold - Barrick merger lifted enthusiasm within the mining sector. As the metal turned up with gold breaking and holding above $1200/Oz (despite a rising USD and interest rates creeping up), miners seemed ready for a lengthy rally, especially after HUI/Gold completed an inverted head and shoulders pattern.

What may spark the next miner rally?

Miners lagging the metals has been an understatement.
Even during last week, with gold up over 2.5% on balance, closing at $1346.8 the miner response was quite meek.  The HUI gold miners index added 3.33%; admittedly more, yet little convincing.