Chart of the day – time to go all in on the gold miners?

As regular readers will know, we have a bear call on gold although this has been tempered in recent days as we expect a short term bounce back towards $1650 in the next few weeks. Our bear call is fleshed out in the guide below and we are shortly to release a new guide expanding on this stance further – this will be available in the next edition of our magazine out at the end of next week. 

The only other time the discounts were close to this extreme was in 1999, when the gold industry was near the end of its long bear market. The current prices of gold mining stocks only make sense if gold were $1,100 an ounce (it currently trades at about $1,600) and so there is a margin of safety in the mining shares absent a dramatic drop in the price of gold itself.

In the interim, we present our chart du jour – the disconnect has reached excessive proportions and we believe it’s time to start building gold mining stocks exposure. Novagold, Avocet Mining, Amara Mining and Aureus all catch our eye. We will expanding on this in the weeks ahead.