Gold Miner Pulse

With graphs last updated on Apr 28, 2017
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.

The blog page is monitoring whether trends are persisting. Therefore the graphs posted here are showing daily observations year-to-date or with a 6 months time horizon. For the long term reference frame, see the articles referenced at the bottom.

Unhedged Gold miners relative to Gold bullion

Gold started off 2017 with a substantial recovery while HUI/Gold rallied. The yellow metal gradually continued strengthening, but sold off after mid February. HUI/Gold is now challenging its early March low ending the week at 0.1513, sliding after the recovery failed at 0.1665 on Wednesday before Easter.

Unhedged Gold Miners index HUI relative to gold bullion (spot market). Daily observations over six months. - click to enlarge
The peak reached in August 2016 with gold above $1300 is better illustrated in the below 12 month graph.
Unhedged Gold Miners index HUI relative to gold bullion (spot market). Daily observations over twelve months. - click to enlarge

How we got there:

Since summer 2016
Precious metals slid in anticipation of the Jackson Hole FED meeting, continued weakening and bottomed on Aug 31st. The early Sept recovery proved short-lived. HUI/Gold ends the third quarter at 0.175, well below the 50 dma, which started retreating.

The early October slide turns the 'seasonal gold rally' into a 'seasonal lie' once more. Not a single year since 2011 the gold price was allowed to strengthen during the autumn months. Any recovery proved ephemeral. HUI/Gold plunged to 0.159 by Oct 7, but seems having bottomed out. Despite Gold regaining $1300, the HUI recovery was timid.

While the initial reaction of the Trump presidential election victory was beneficial for gold, a collapse followed with gold plunging beneath its October low. Thereafter a smothered rally, followed by a 3 days slide brought  gold close to $1200/Oz. The 'death cross' for HUI/Gold could not be avoided any longer. Despite gold continuing its slide throughout December, HUI/Gold only gave way on Wednesday, Dec 14. However, since before Xmas, HUI/Gold has been recovering, closing the year at 0.158, despite a slide on Friday Dec 30. Miner strength anticipated the modest gold recovery, with the yellow metal closing the year at $1150.9.

Recently the HUI/Gold regression (previously also called 'bear market logic'): a linear but non-proportional relationship between HUI and Gold has been described, which puts HUI/Gold (or for that purpose Gold/XAU) as valuation parameter in a different perspective. The HUI index has been calculated since 1996.

Global X Silver Miners ETF (SIL) relative to silver bullion

Silver started off 2017 with a substantial rally. The white metal is now up 15.3% YTD, with miners strengthening especially the first week of January. Early March, SIL/silver bottomed at 1.9 upon silver breaking below its $17 support. After recovering to 2.08, SIL/Silver slid to 2.02 last Friday.

Global-X Silver Miners ETF, SIL relative to silver bullion; Daily observations over 6 months. Click to enlarge
The peak value reached in August 2016 with silver near its $20.7 peak is better illustrated in the below graph covering 12 months.

Global-X Silver Miners ETF, SIL relative to silver bullion; Daily observations over 12 months. Click to enlarge
NOTE: In 2015, there has been a 3:1 consolidation (or reverse split) on SIL. Any historic values have been changed accordingly.

How we got there:
Since summer 2016
The SIL/Silver ratio kept firming till early August and upheld better despite silver well off its high. The ratio now dipped below its 50 dma by late August, with the early Sept recovery failing to turn the tide. We have experienced the first major correction within this new bull market. A substantial part of the silver gain since late January has eroded away. Mining investors turned cautious, sending the SIL/Silver ratio substantially lower. It timidly started recovering after mid October, only briefly regaining its declining 50-dma.

After an initial rise upon the Trump presidential election victory, the present silver slide drags along miners, with SIL/Silver back to the level we left behind late May. Several weeks after HUI/Gold, the ratio SIL/Silver put down its 'death cross' with the 50dma sliding beneath the still rising 200 dma. Last week, with silver briefly plunging below $16, miners were shell shocked with SIL/Silver giving way. Silver didn't recover before XMas, but miners prove more resilient. By end 2016 SIL/Silver is recovering to 2.01 despite the white metal sliding below $16 on Dec 30 and closing at $15.88.

Canadian Gold and Silver Mining indices
How gold miners are performing is shown by the capitalization weighed gold miners index of stocks included in the Gold Miner Pulse database (yellow diamond symbols). Note that most quotes are in CAD, which has been fluctuating to the USD. The long term depreciation of the loonie mitigated the miner loss during gold miner bear market.

GMP list based (and capitalisation weighed) gold (yellow dots), silver (blue) and equal weight (red) miners indices. Reference 1000 on Nov 19, 2010  (click to enlarge)
The third index added uses equal initial weights of all (silver and gold) miners from the GMP database. Because of its simple weighting scheme, comparing this index to the capitalization weighted indices gives a fair idea of how junior miners and explorers fare as compared to the large miners.

How we got so deep into trouble is best illustrated when showing a long term graph of those capitalization weighted miners indices. It also puts both the short-lived August 2013 and past March and June 2014 and Jan 2015 miner revivals in perspective. 
The revival since late Jan 2016 healed the last leg down of the miner bear market. We briefly topped the May 2013-Oct 2014 trading range.

Long term graph of the GMP list based (and capitalisation weighed) gold (black), silver (blue) and equal weight (red) miners indices. Reference 1000 on Nov 19, 2010. - Data till Apr 21, 2017 (click to enlarge)
The silver miners index rose till 1400 in April 2011, peaking three weeks earlier than did the silver price. The silver miners index also posted a higher maximum during both the March 2014 and June to early August recovery than it did in the August 2013 recovery. The gold miners index and the equal weight index did not peak higher at any of the failing 2014-15 recoveries than they did in August 2013. By January 2016 silver miners nearly completely lost their edge relative to gold miners, yet the recovery proved more vigorous.

Performance graph
There is an important performance disparity among the gold and silver miners of the GMP database. Too many laggards seem moribund. The median (or middle) miner (with an equal number better and worse) is losing 59.8%, more than a double is needed to break even. The average loss posts at 34.3% as the distribution is slanted towards the high gains.

GMP Miners sorted by loss to gain since inception on Nov 19, 2010. Click to enlarge
There are 13 miners/explorers losing 90% or more, with 6 thereof down over 95%.  We now have 19 miners quoting above their Nov 2010 mark, now led by Osisko Mining; 4 stocks have doubled. The top 5 miners are omitted in the above graph to avoid scale expansion, but you find the top 10 in full detail below:
Top 10 miners of the GMP list on a logarithmic scale from 10% till 1000% gains
In the lower decade, minor gradations are 10% apart; in the upper decade they are 100% apart
A more detailed analysis including list composition changes, is found on the page "miners performance". The miners included in the database are classified in five performance quintiles. This allows evaluating how individual miners went down with the herd... or withstood the tempest.

Related blog articles

Several more detailed articles focusing on the longer term have been published. These are using the same approach as this blog page and still are a good read to grasp the historic perspective:
  1. Miners relative to precious metals: a tactical approach; (July 2, 2012)
  2. Miners relative to precious metals: An update on 2012;  (Jan 13, 2013)
  3. Anatomy of a gold miner bear market (Dec 30, 2013)
  4. Three year slide of precious metal miners (Dec 31, 2014)
  5. Gold miner bear market starting its fifth year (Jan 3, 2016)
  6. Precious metal miners relative to metal prices (Dec 31, 2016)
During 2011-15 and even over the long haul, the relative performance of mining majors to the precious metals they produce was disappointing for major gold miners, even while the metals were in a solid uptrend.  See: Gold miners: three decades for naught or Decades of underperformance

While these blog articles had a time perspective covering years or decades, the present blog page is monitoring whether the trends observed are persisting. Therefore the graphs posted here are showing daily observations year-t-date or with a 6 months time horizon.

Over a year has lapsed since Gold and Silver miners bottomed on Jan 19. An evaluation of the first half year of a rejuvenated precious metals bull market and the impulse phase on precious metal miners is found here.