Two Stunning Charts of the Gold Miners

Two charts help to illustrate the full extent of the current depressed nature of gold share prices – four year charts of the ratio of the HUI (Gold Bugs Index) to the gold price itself and the ratio of the HUI to the S&P 500:

Click to enlarge

A great deal has already been made of the severe underperformance of the gold mining sector relative to the price of gold, however, perhaps even more significant has been the gold miners performance vs. the S&P 500. After all, at the end of the day gold mining equities are still just equities as many people learned the hard way during the 4th quarter of 2008. The gold miner’s attempt to decouple from the S&P during August/September 2011 led to a failed breakout and a sharp reversal to the downside:

I continue to believe that we are either on the brink of a major market downturn (which would also drag the gold price significantly lower) or there will be some mean reversion across the gold mining sector relative to the price of gold and the level of the overall US equity market.