Gold miner exchange traded funds may be gathering strength to finally outperform bullion on low valuations and a shift to gold-related stocks.
Miner ETFs have lagged bullion prices by a wide margin in recent years during gold’s relentless march higher. [Gold ETFs on a Tear as Metal Pushes Toward $1,800]
They have been punished as investors decided the shares should no longer trade as a proxy for physical gold, Regent said in the Bloomberg article. [Silver Miner ETFs Keep Pace with Metal’s Price Rise]
The rising popularity and ease of investing in gold ETFs has likely diverted money away from miner stocks. [Gold Miner ETFs Look to Catch Up to Bullion in 2012]
The NYSE Arca Gold BUGS Index, a benchmark of gold miners, has advanced 53% in the past five years while spot gold traded in London has more than doubled, according to Bloomberg. [Small-Cap Gold Miner ETF Jumps Nearly 30% in a Month]
The index trades at about 17 times earnings, compared with an average of 65 over the past 10 years. The ratio fell to a decade low of 15 on Jan. 20. [Gold Miner ETFs Rise to Test 200-Day Average]
“There will be a point where the multiples just converge with every other company,” Regent said in the report. “Then you will start to see potentially increased leverage in the share price versus a gold price move.” [Gold Miner ETFs May Bring in Dividend Hunters]
Market Vectors Gold Miners