Loading ...Gold vs Miners Circa 2015-2016
Not quit the setup we have… but an example to show how miners can lag gold in taking off. In 2015-2016 explosion from bottom… gold had already advanced some before miners broke out of their respective base. Relative strength of gold vs miners in early stages is an often seen behavior in bull markets… that is how early we are in this bull era.
Why do gold miners lag: because US miners have bad cost profiles and little free cash flow. At current gold price miners are correctly valued or maybe slightly (10-20%) undervalued, not more!
So for miners to be really outperforming spx.. they need an even higher gold price? something above 1800$?
If gold price stays 6 months or more above 1600-1700, and big miners like AEM, GOLD, AU, KGC hike dividend as NEM just did, miners could start to outperform. Only then serious investors will look at sector. As an example look at base metals players like RIO and BHP that have big free cash flow and div yield of 3%. That’s what we need in this sector, a min 2-3% yield should be the norm. If not achievable, better return money to shareholders and not grow production just for the sake of growth, but focus on free cash flow and dividends.
Thaks Alex. I know nothing for fundamentals… captivating.
And that 6 months lag is consistent with my observations from previous precious metals bull markets