Ye of little faith. ASX selling gold miners short?

With gold resuming its bid Friday night let’s take a look at where the miners as a sector are versus the underlying price.

On a purely one-to-one basis, the recent correction looks a little overdone if you think we’re in a bull market:

A better way to look at it is using an index chart:

That shows that the mining sector is more elevated versus the underlying price over the past twenty years. But not extremely so. In fact, the current multiple of gold-to-sectoral valuation is roughly neutral if this is a bull market. The ratio gets considerably more stretched when things are overheated as junior miners become profitable.

Clearly, the cheaper entry points for bull markets are in extreme sell-offs such as early this year and 2008 but those are not the norm.

If you are considering gold miners then research the individuals!

Houses and Holes

Comments are hidden for Membership Subscribers only.