This has been a big one I’ve been watching develop since late last
year: Gold Miners vs Gold the Metal. When it comes to the yellow metal,
we always hear the arguments,
“buy gold, stay away from the companies”, or
“the miners are a better value than the metal”.
People can make very intelligent arguments for each side, but the trend
is really the only thing that matters. For three years, the metal has
been the place to be relative to the miners. In fact the GLD:GDX ratio
is up 170% during that time span.
Today we’re taking a closer look at this ratio because I believe
things are changing. Going forward, I have a good feeling the miners
will be the outperformers between the two. I first wrote about this
last month as it started to develop. Since then, we’re seeing some further consolidation that I think is worth following up on.
The first one is a daily line chart showing a clean downtrend line
from 2012 breaking to start the year. Now, just because a trendline is
broken doesn’t necessarily mean the trend has reversed. We just know
that the trend has changed; perhaps a sideways or upward trend will be
follow.
The next chart takes a little bit of a closer look at this same line
chart, but this time we’re focusing more on what could potentially be a
false breakdown in November/December. Notice how in January we got back
above those June and October lows.
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