Key Gold Index Doubles In 2016 (But Nobody Noticed)

Tyler Durden's picture

Submitted by Pater Diekmeyer via SprottMoney.com,

Gold investors learn early that one of the best ways to leverage their exposure is to buy gold stocks. That strategy has performed well recently. As of Friday, the NYSE ARCA Gold Bugs Index , which trades under the symbol HUI, had nearly doubled since its January low. The index far out-performed the yellow metal itself, which increased in the low double digits.

However, as one expert points out, while the hard money community followed the rise every step of the way, the public is totally unaware. “ Mainstream media and leading economists throughout 2015 ridiculed gold “bugs,” said Marc Faber , editor of the Gloom, Boom and Doom Report . “They now find it embarrassing to talk and write about gold stocks, which are up by approximately 100% in 2016.”

A quick search of Google News suggests that Faber is right. Entry of a range of key “gold” and “stock” related words into the search engine revealed not a single prominently ranked story dealing with the breadth of the index’s* broad-based rise, which was led by issues ranging from Barrick to Kinross, Agnico and many more.

Nobody cares

Grant Williams, producer of RealVisionVideos and publisher of a financial newsletter titled Things that make you go hmmm, agrees. “The public are generally the last people to catch on when a bull market begins,” said Williams, a phrenic global traveler, in a telephone call from the Cayman Islands, where he was making his office that day.

“People don’t care about gold,” said Williams. “They care about a rising gold price. And they generally only find out that is happening once the media catches on. By that time much of the major gains have already been made.”

Revenues up, costs down

The biggest drivers of the rising price of gold stocks appear to be strengthening fundamentals. Key among these is the rising value of the commodity itself. The fact that gold is priced in strengthening US dollars, means that when producers convert their revenues to local currencies, they generally also profit from a foreign exchange advantage.

On the other hand, many producing countries, such as Canada have seen a relative decline in many production costs. These include employee salaries, which while high in global terms, are priced in local currency. In addition, although oil prices, which are a significant expense in many mines, have been strengthening lately, their secular weakness has been particularly good for mining companies’ bottom lines.

Gold mining share prices are also being driven up by many of the same forces which are pushing up the prices of hard assets in general. These include increasingly desperate actions by global central banks, particularly the European Central Bank and the Bank of Japan, which - through moves to write off their debts by means of negative interest rates - are de facto defaulting on their obligations.

Can mining stocks go higher?

That said, as Grant Williams points out, despite their promising start to the year, it is far from certain that mining stocks will continue to rise, and that the sector has turned the corner. For one, many investors were burned badly during the bear market of the past six years and it will take time for memories to fade. “Even if mining stock momentum has shifted, these transitions usually come with considerable volatility,” says Williams. “They are thus unlikely to go up in a straight line.”

Coming months will give us a far better clue as to how far the trend is entrenched. All we know right now is that the general investing public, and mainstream media, remain out of the picture.

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BaBaBouy's picture

zzzzzz... GOLD Beachez...

Mr Pink's picture

Anyone notice stawks went vertical at market open? They don't even attempt to hide their rigging anymore

Money Counterfeiter's picture
Money Counterfeiter (not verified) Mr Pink Apr 28, 2016 10:11 AM

PPT buying one more day before we are Venezuela.

BaBaBouy's picture

According to FR.TO Ceo, SILVER/GOLD production ratio is 10 to 1.

Yet price ratio is around 73 to 1 ...

Likem AG right now...

 

 

Took Red Pill's picture

and what's going on with platinum today?  Currently, gold is up $8 but platinum's up $17!

jus_lite_reading's picture

Buy gold, silver, oil and deep water rigs. Dump oil at $70, keep the rigs until $90.

Theonewhoknows's picture
Theonewhoknows (not verified) BaBaBouy Apr 28, 2016 10:09 AM

Gold will be gaining on all fronts as the QE train is being continued (after FED, BOJ and ECB) - the war on cash will send gold up and up. http://independenttrader.org/war-on-cash-a-piece-of-a-bigger-puzzle.html

Latitude25's picture

MUX is up over 200% since I bought at .72

Caviar Emptor's picture

Goldiggers get such a bad rap.

BeaverCream's picture

It's very interesting what's happened to gold and silver since the Shanghai gold fix opened.

dimwitted economist's picture

I am a Fan of BOTH Gold AND Silver...

this latest move with silver seems to indicate "something" has changed. somewhere. somehow.

Manipuflation's picture

Keep stacking.  I just quit my job and I can because I have been stacking for 17 years.  I am not sure if I am going to North Carolina or Idaho. 

the grateful unemployed's picture

gold is also priced in just every other currency in the world. if a canadian mining company has lower costs and it sells its gold to canadian customers there is no advantage to lower costs through a weaker canadian dollar. and on the surface of things i doubt costs are lower, service industry wages are outpacing every other personal income component (except 1%) it might be buying heavy equipment from CAT is cheaper.

in CA the cost to rebuild my house according the my insurance premium is 25% more than what the house is worth. let me guess that in overheated Vancouver, CA its about the same. which by extension should apply to just about everything else which involves labor, equipment and materials and most of all permits.

and its nice the MSM has been completely silent, they are just burger flippers who turned in their spatula for a microphone, ergo they are paid too much and do too little to earn it.

for some reason gold mining stocks were badly oversold, i have the XAU/DJIA ratio going back to the crash in 2000 when XAU went into the 40s and DOW 12K. lately the ratio was even half of that, which is to say obscenely oversold. some of this is just snapback, ratios are bad planning tools because they have four outcomes, including the ratio stays the same and both indexes crash. and to that end i even believe that the move in gold is just the tail wagging the dog, the miners are lifting the bullion..

i feel pretty sure gold and the miners will go down with the equity market crash, just not as fast or as far, but it will still hurt. my study of the ratio also tells me that the miners lead the equity market when it turns bullish. right now i call this a dead cat bounce plus one because equities are not going to move higher, i hope i am wrong about that either way i am holding my mining stocks for the long haul.

Consuelo's picture

 

 

All that matters for gold going forward in my view, is what China (and Russia, in concert), Do or Don't do with regard physical gold buying/holdings/geopolitical strategy, etc.    All else is noise at this point.

Sam.Spade's picture

Not a 'Gold Index', but a 'Gold Miner's Index'.  There is a VERY big difference.