If you feel this needs being quantified, the HUI/Gold regression can provide you with the detail you like. Overvaluation or undervaluation can be estimated by the residual relative to the regression line. Negative residuals indicate that the gold market neutral value of the HUI is above its current value, which is the case since late August.
Investment sentiment turned sour rather quickly as gold miners fell out of favour: on August 12, overvaluation peaked at a residual reading of 32.9. By August 24 valuation had been turned towards a gold market neutral reading, with residuals around 0 during a few days. By August 30 miners started lagging gold. Despite the early September recovery, miners only approached the gold market neutral valuation but later sold off, again lagging gold. By Friday Sept 9, the HUI lags gold by over 11 points.
Individual miner response on gold market movesThe July blog article: The rising tide lifting all boats (?) pinpointed how many of the poor performers made stellar gains during the first months of the gold market recovery. Yet they still fall short over the long haul when compared to financially more solid miners. The ‘best of class’ miners avoided negative cash flows even as gold bottomed, had incurred smaller bear market declines and hence did not need a magnificent rally to turn a long term decline into a solid advance.
As miner sentiment turned sour again, it is most likely that miners which sky rocketed during the start of the rejuvenated gold bull market are exactly those which once more will be suffering quite hefty losses during this downturn.
Sprott Asset Mgt ETF’s: Designed to outperform
Our focus will be on the Sprott Gold Miners ETF (SGDM) and Van Eck’s Vectors Gold Miners ETF (GDX). The latter is by far the largest ETF of this market segment in terms of total market capitalization ($ 9.58 Billion). Moreover it has the longest track record, going back to May 2006. SGDM is relatively recent, going back to July 14, 2014 and its market capitalization only amounts to $ 214 Million.
|Sprott Gold Miners ETF (SGDM)|
SGDM Top Holdings (71.93% of Total Assets)
|Symbol||Company Name||% Assets|
|GOLD||Randgold Resources Ltd||18.59%|
|AEM||Agnico Eagle Mines Ltd||12.55%|
|RGLD||Royal Gold Inc||12.40%|
|PAAS||Pan American Silver Corp||4.58%|
|ABX||Barrick Gold Corp||4.40%|
|AU||Anglogold Ashanti Ltd||4.35%|
|AG||First Majestic Silver Corp||3.89%|
|BVN||Buenaventura Mining Co Inc||3.88%|
|KGC||Kinross Gold Corp||3.10%|
|VanEck Vectors Gold Miners ETF (GDX)|
GDX Top Holdings (59.29% of Total Assets)
|Symbol||Company Name||% Assets|
|NEM||Newmont Mining Corp||9.87%|
|ABX||Barrick Gold Corp||9.79%|
|NCM||Newcrest Mining Ltd||6.04%|
|AEM||Agnico Eagle Mines Ltd||5.45%|
|SLW||Silver Wheaton Corp||5.45%|
|GOLD||Randgold Resources Ltd||4.49%|
|AU||Anglogold Ashanti Ltd||3.43%|
|KGC||Kinross Gold Corp||2.62%|
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