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.

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.

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.

Gold miners persistently lagging the metal

The latest downturn of gold brought the yellow metal to a Friday close of $1315.7, easing barely 1.22% over the week and still holding on to a tiny advance year-to-date.
However the HUI plunged 7.17% leveraging gold down sixfold. While miners had been persistently lagging the metals throughout 2017, their decline currently is aggravating.

Persistently lagging the metals

The last downturn of gold and silver brought the yellow metal to a Thursday close of $1266.2 to end the week at 1273.2, easing barely 0.53% over the week. However the HUI plunged 5.31% leveraging gold down tenfold. Miners have been persistently lagging the metals for most of 2017. 

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.

Gold relative to the Philadelphia Gold & Silver Miners index

The past cyclical gold bear market has been both lengthy and severe for the precious metals, but for precious metal miners it has been detrimental. 'How devastating the gold and silver miner bear market has been' is well illustrated when plotting a miners index together with gold on a comparable scale.

Gold miner rally: Bull market logic

Wild gyrations

Ever since bottoming barely above 100 on Jan 19, 2016, the HUI gold miners index more than doubled.  It closed at 226,1 on Friday May 6, up 125% from its trough or 103% year-to-date.  However, after peaking at 233.5 by the Apr 29 close, we witnessed a week with wild gyrations, starting with a three days losing streak culminating in the 10.25% landslide loss on Wednesday May 4.  Much overdone so it seems, since the Thursday recovery rally was in fact anticipating precious metals eventually firming on Friday May 6.

The bear market logic for gold miners: Continuation and Analysis

The summer slump for precious metals has turned into a nightmare, with gold breaking below $1100, platinum into the triple digits and silver well below $15. While the July slide is pretty bad, what makes it worse is precious metals setting fresh multi-year lows.