Gold stocks is in a 50-year bear market when measured in gold. This (very) roughly means that on average, it has been more economical to buy gold rather than to mine it.

Interestingly, South African gold mining production peaked two years after, in 1970, as if to confirm that mining was getting rather uneconomical.

There are a peculiar set of reasons why gold mining was so uneconomical, and this I address in my other publications.

Below, is a long-term chart of the Barrons Gold Mining Index (BGMI) to Gold Ratio (chart from longtermtrends.net) which shows this bear market:

After the peak in 1968, the ratio just kept on falling. Interestingly, during the 70s as well as from 2001 to 2011, gold had a great bull market, yet the gold stocks were under performing gold.

Will this bear market ever turn? Yes it will. When will it turn? When the conditions that causes it turns.

Some of these conditions have already turned, or are in the process of doing so. One is the oil price, a major factor in gold mining margins, peaked in 2008, and appears to be close to a massive decline.

From a technical point of view, there are signs that indicate the turn is happening. Below, is a comparison of gold’s correction from 1980 to 2001 (bottom chart) and the BGMI/Gold Ratio (top chart):

Both corrections appear to have the typical 5-move corrections (from top to bottom). It appears that the BGMI Index/Gold Ratio is at the end or very close to the end of its correction.

For more on this and this kind of fractal analysis, you are welcome to subscribe to my premium service.I have also recently completed a Silver Fractal Analysis Report as well as a Gold Mining Fractal Analysis Report. You can also subscribe to this blog (enter email at the top right of this page) to get my regular free gold and silver updates.

Warm regards,

Hubert

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

http://hubertmoolman.wordpress.com/

You can email any comments to hubert@hgmandassociates.co.za

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.