GDXU - Are Gold Mining Stocks Cheap?
2024-02-01 06:00:00 ET
Summary
- The price of the average gold mining share is in a long-term downward trend relative to the price of gold.
- The gold/oil ratio has begun to trend downward due to temporary strength in the oil market.
- Gold mining stocks also look cheap at the moment relative to general mining stocks.
Editor's note: Originally published at tsi-blog.com on February 1, 2024
[This blog post is an excerpt from a recent commentary at Speculative Investor ]
The HUI peaked at over 600 way back in 2011 with the gold price about $100 lower than it is today. However, this provides no information whatsoever regarding the HUI's current value or upside potential. The reason is that the average cost of mining gold is much higher now than it was in 2011. Due to the ever-increasing cost of mining gold, over time it takes a progressively higher gold price to justify the same level for the HUI. Putting it another way, due to the increasing costs of mining gold and building new gold mines, the price of the average gold mining share is in a long-term downward trend relative to the price of gold. An implication is that the HUI isn't necessarily cheap today just because it happens to be more than 60% below its 2011 level....
Are Gold Mining Stocks Cheap?