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Miners continue plunging on any precious metal retreat and follow almost reluctantly while gold and silver are recovering. Expectations have aligned with experience until this infernal dynamic got deeply encrusted in the investor mindset.

The blog title 'Miners disappointing' therefore is an understatement, inspired by a previous article Miners will continue to disappoint (Jan; 26, 2019). That seemed to be a bold statement as precious metals had been in an uptrend with miners ultimately responding while further pessimism seemed out of place. However I was merely sensing the valley behind the hill we were climbing. The valley turned out to be another precipice.

HUI versus Gold
The major gold miners index HUI, when divided by the Gold price gives a good idea how miners are performing relative to the yellow metal. HUI/Gold is monitored over a 6 months period on the Gold Miner Pulsepage giving a short overview of the recent miner performance. We are extending the perspective to a full year, which still enables using daily observations.

HUI /gold over the past year (May 2018 - May 2019)
It is useful to post the gold graph on the same time scale for that period. Though the yellow metal has been more or less range bound, price fluctuations nevertheless extend over $150 this past year.

Gold price (USD/Oz) from May 2018 till May 2019, daily observations at the COMEX close.

First few observations: HUI/Gold resisted the downtrend of the yellow metal into July 2018. Hence, miners weakened in lock-step with the yellow metal while the pace of the gold slide seemed moderate and the horizon seemed set for a prompt recovery. Gold broke below $1240 before mid July. A hesitant technical recovery didn't bode well and the gold slide resumed with a precipitous dip by mid August to $1170.

In the mean time HUI/Gold slid from 0.14 to 0.117. Mining investors were in despair and yet the worst was still to come: Despite gold moving sideways in September, HUI/Gold plunged to its 12 months low at 0.11 mid September. Miners lost about 22% more than had the yellow metal.

The gold recovery set in early October, modestly at first but confirming towards end 2018. The rally extended into 2019 with gold peaking on Feb 20. 

HUI/Gold started a shaky uptrend from the oversold mid September 2018 bottom till mid April 2019. Yes indeed: we have seen a miner come-back with the gold bugs again resisting initial gold weakness while the yellow metal kept flirting with its $1300 resistance. After that finally gave way, it has been back to square 1 again. Though gold now stands near $1285/Oz, the HUI/Gold ratio dropped to 0.1161: just below the level the ratio slid to at the mid August 2018 gold plunge.

HUI gold miners index over the past year (May 2018 - May 2019) - daily observations.

Yes there are flares of hope when miners outperform the yellow metal. Unfortunately they are scarce, far apart and unpredictable. While gold is more or less flat over the past year, the HUI index gave way almost 20%.  Over the long haul, holding on to the yellow metal has been a less discomforting strategy. 
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Searching for excellence
Precious metal explorers as investment vehicles have a long standing track record of extreme volatility. As Rick Rule of Sprot Asset Mgt. USA uses to formulate it: “We have known both the thrill of victory and the agony of defeat”.
It is obvious that the success of precious metal explorers goes together with both the exploration talent of a small team of geologists and with their broader management skills. Add just a grain of luck in picking among the promising geological anomalies the successful drilling locations. To end this introduction with another quote of Rick Rule: “Profitable miners ultimately will see their share price reflect increased cash flows from mining operations, but you can’t count on a gold bull market to bail you out of a dumb decision on an explorer investment.”


Major miners aren't replacing the reserves they are mining

At the Vancouver Resource Investment Conference (VRIC) Daniela Cambone of Kitco interviews Brent Cook of Exploration Insights. (Jan 2019)

Miners Just Can’t Keep Up – Expert - YouTube
Mega mergers on the scale of Newmont and Goldcorp are happening because miners can’t keep producing fast enough, and need to consolidate resources in order to meet demand, said Brent Cook of Exploration Insights. “We’re at a time and space where the amount of time it takes and money it takes to discover, prove up, and develop a mine, is longer than we are depleting reserves,” Cook told Kitco News on the sidelines of the VRIC.

Why mining majors don’t send their own explorer teams into the hills
Most major gold mining companies still have a few geologists on their payroll. So why don’t they devote their efforts to finding the next generation of promising locations for their companies to proceed in building new mines? 

The toll of the gold bear market has been paid cutting 'overhead' in mining. Overhead implicitly means anyone not directly involved in mining, which also applies to exploration activities. If any exploration still is on the table, it are a few (or just one) senior geologist scrutinizing the work that explorers are delivering. As a result we witness ever more mining companies taking a stake in successful explorers who are exploring some ore bearing layer or developing a resource which looks promising.
Geologists continuing any field for major mining corporations often specialize in extending existing reserves. Especially with underground operations with known reserves for only few years of exploitation, they are most successful in finding the continuation of veins at geologic faults.

Some of the hurdles
Gold wouldn’t be quoting near $1300/Oz if it were easy to find. If a gold resource is identified, numerous holes will be drilled to quantify the resource (and getting a NI-43-101 compliant resource description). Resources will be upgraded from the inferred to the measured and indicated categories. Simultaneously, different aspects of potential mine construction will need to be studied. Those may lead to a preliminary economic assessment, proving the economic viability of the project. I’m just enumerating some essential phases of exploration and mine development, at each of which major problems may show up, putting the project at risk. Probably only one exploration team out of ten is successful at identifying a sizable resource that looks promising enough to continue with development. Among those successful projects, only a small fraction will eventually make it into an operating mine.
Generally the gold explorer having identified such a resource will be bought out by a major mining corporation. Size of the deposit and proximity to existing mining infrastructure are real triumph cards triggering the interest of mining majors.

Explorer-developers rarely turn to mining
Only on rare occasions, explorers proceed with a project throughout permitting and mine construction until operating the mine. Excellent geologists rarely are competent mining engineers: the expertise needed in mining being completely different from that in exploration, it is clear that the transition to a miner will demand sourcing in competent engineering and management staff. The financing necessary for mine construction will inevitable be a major challenge for an explorer developer considering to try it on their own.
Brent Cook formulates it like this. “When selecting explorers with viable projects in the stage of being permitted, I prefer a project which a mining major is likely to bid for, not the project an explorer is doomed to build into a mine.”

Stock picking dilemma
Writing something sensible on picking explorers doesn’t make me a stock-picking expert. Though I may find a good reason not to consider over half the stocks I come across, there will be enough failures among those I consider suitable picks… and the one real gem in there, I might take a profit on after it doubled…
Many of us junior mining investors have their list of stocks they follow and/or are invested in. Our aim is "keeping track of market tendencies and trying to figure out which juniors do better and why". This drove me to implement a new contributor driven explorer & junior mining spreadsheet.

The contributor driven explorer and (junior) mining spreadsheet
Pooling efforts with any cooperative peers out there, I started the “contributor driven explorer and junior mining spreadsheet”. The idea is to get a selection of explorers, junior or mid-tier producers of gold and/or silver. The first focus is on Canadian listed juniors, but I may take on board an explorer with main listing on the American markets, ASX or the LSE as well. With the Barrick-Randgold merger, we got on board of a mining major.
The selection should then be the basis of a discussion forum open for comments on and links to drilling results for the explorers, operational results for junior producers and investment plans with their financing conditions for both.
Included as a benchmark are some of ‘the classics’: PM mining ETF’s: Market Vectors GDX and GDXJ, the Global X Gold explorer ETF GLDX and silver mining ETF SIL, a few streamers or Royalty companies, the HUI and XAU mining index. Though I don't particularly like the leveraged plays NUGT and DUST, keeping them in the benchmark will show the viewer by how much these products underperform the market over any rally / swoon cycle. The flaw is not in a lack of compliance with their benchmark, but rather by design. 

The HUI and XAU both are focusing on large-cap miners, with Van Eck's GDX being the ETF mirroring the performance of precious metal mining majors. Van Eck's GDXJ and escpecially the Global X Gold Explorer ETF GLDX are somewhat better benchmarks for what we have in focus here.
The contributor driven explorer spreadsheet was started late October 2011. Only few of the initial stocks have remained on the list.


Currency
All initial picks were in CAD. Yet some more recent picks are in USD. It should be borne in mind that previous gains and/or losses incurred therefore are seen from a Canadian perspective. There would be a downward bias for a US investor.

Additional lists
The spreadsheet has a few additional lists:
  1. The successful exits (any explorers taken over or divested taking profit) and
  2. the ‘exile’, where I keep the explorers taken off the list. Weeding out laggards and taking a loss  though painful, is essential in portfolio maintenance. Cutting losses is as much about swallowing your pride as about saving whatever is left.

Further discussion
During the early years, I used to post about list updates on the TF-metals forum on the thread: Selecting explorers and junior miners. After that website has been thoroughly reorganized, with all 'old topics' archived, a new thread was started in the 'Traders' section.
Because of the continuing miner bear market late 2014, that thread was called: Precious Metal Miners: Fathoming the Abyss. For Dutch speakers, the subject also is covered on the mining thread of the Freegold Forum. I'm a less avid poster on those forums than I used to be.

Further reading:More similar papers are linked to in the top section of the list of blog articles.
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PDAC is the world’s premier mineral exploration & mining convention. In addition to meeting over 1,000 exhibitors, 3,500 investors and 25,600 attendees from 135 countries, you can also attend technical sessions, short courses and networking events. The four-day annual convention held in Toronto, Canada, has grown in size, stature and influence since it began in 1932 and today is the event of choice for the world’s mineral industry.

A must watch is the below video with Daniela Cambone of Kitco interviewing two celebrities in the mining business:
The Only Panel On Gold And Mining You’ll Need – Rick Rule And Amir AdnaniGuest(s): Rick Rule President & CEO, Sprott U.S. Holdings
Amir Adnani, CEO, UEC
Rick Rule, CEO of Sprott U.S. Holdings, joins forces with Amir Adnani, chairman of GoldMining and CEO of UEC, in this panel discussion on the hottest headlines of the gold industry today.

Topics range from the Barrick-Newmont takeover attempt, Trump’s third year in office, and their outlook on gold and uranium prices.


The Only Panel Talk On Gold And Mining You’ll Need – Rick Rule And Amir Adnani - YouTube

* * *


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Gold StockAnalyst (GSA) is the market's most respected and successful source of insight and guidance for gold stock investors. The title of GSA's flagship newsletter — GSA Top10 — also sums up its unique investment approach that has an amazing — and verified track — record. Future results cannot be guaranteed, but we promise the GSA Top10 is unlike any stock research you've ever seen.
GSA has been founded by John Doody, an Economics Professor for almost two decades. Doody became interested in gold due to an innate distrust of politicians and concern over their habit of debasing the currency via inflationary economic policies. Other than the Top10 list, John Doody also publishes a full coverage GSA_PRO list covering a universe of about 60 gold miners and developers (near producers). Pure exploration is out of scope. Since 2012, there equally is a Top5 silver miners list (only 5 since there are fewer to choose from).
Last but not least a yearly Gold Stock Analyst investor day is organized towards end February in Fort Lauderdale, Florida. Mining CEO’s of the investment letter’s Top10 list are invited at the occasion of this Gold Stock Analyst investor day.

Which ideas do GSA Top-10 mining managers want to share with the audience?  Kitco sent Daniela Cambone for some interviews, which I gladly share.

So let's start off with the interview of the event organizer and GSA founder & chief editor John Doody.

Only The Fed Could Kill Gold Now"The current gold bull market began in August, 2018, and all signs point to even higher prices.
I don’t see the storm clouds on the horizon. The thing that could kill gold is the Fed, and even though the Fed was raising interest rates at the end of 2018, gold was still up and it finished higher than it was at the low in August,” Doody told Kitco News on the sidelines of the Gold Stock Analyst Investor day.

Only The Fed Could Kill Gold Now – Analyst - YouTube

***

Royalty companies often are the back bone of a precious metal investment portfolio. The long term track record of Franco Nevada places it on top of its peers.


Here's How Franco-Nevada's President Sees Gold Right Now
Gold is three years into a bull run and "exciting" times are to come, said Paul Brink, president & COO of Franco-Nevada.

"I think it's a very exciting time, the last five years, what we've been finding is rate raises in the U.S. and a strong U.S. dollar, and we're at the point of inflection," Brink told Kitco News on the sidelines of the Gold Stock Analyst conference.

Here's How Franco-Nevada's President Sees Gold Right Now - YouTube

***

John Doody doesn't like to invest in explorers. However he makes an exception for a near term producer having done its homework on the largest unmined copper-gold reserve in North America.

Majors Are Running Out Of Mine Life, Says This Veteran MinerWhile the senior producers are busy buying each other, investors are diverted away from the fact that these large miners are running out of mine life and need to start buying fresh deposits, said Rudi Fronk, chairman & CEO of Seabridge Gold.
“The elephant in the room that nobody talks about, even with these mergers that are going on, is that the mine life that the big gold companies have left is about 10 years. They need to find new projects and now they’re starting to look for those opportunities,” Fronk told Kitco News on the sidelines of the Gold Stock Analyst Investor Day.

Majors Are Running Out Of Mine Life, Says This Veteran Miner - YouTube

***

You will look in vain for any mining majors on this investors day. They aren't on the list. However here are a few junior or emerging miners that are.

Why This CEO Doesn’t Want A Repeat Of 2011 For Gold
While many gold investors would be happy to see a euphoric rally in gold similar to the 2011 scenario, Christian Milau, CEO of Equinox Gold, would prefer to see a steady rise in gold prices.
“A gradual increase is nice. If [gold] goes up significantly overnight, say $100, everyone wakes up and goes gold’s alive again and is exciting to invest in. If it gradually increases then I think people forget and don’t notice, and that allows us to go and maybe buy a couple of assets, to finance them, when others can’t,”

Why This CEO Doesn’t Want A Repeat Of 2011 For Gold - YouTube

***
Sabina CEO: We’re Seeing “The Beginnings Of A Bull Market In Commodities”
Fundamentals in terms of pricing saw gold, in every currency, outperform equities benchmarks in 2018, pointing to the beginning of a new bull cycle, said Bruce McLeod, CEO of Sabina Gold & Silver.
“We’ve seen gold and gold equities even outperforming the S&P in 2018. So, we’re seeing the beginnings of what generally are the start of a bull market these commodities,”

Sabina CEO: We’re Seeing “The Beginnings Of A Bull Market In Commodities” - YouTube

***

The Biggest Challenges Facing Miners, According To One CEO
Miners face a number of issues that aren’t solely financial, said Peter Tagliamonte, CEO of Belo Sun Mining.
“I think in general, in the world right now, permitting social license is very important,” Tagliamonte told Kitco News on the sidelines of the Gold Stock Analyst Investor Day. “I think mining projects, in general, around the world have to pay more attention to social license, environmental issues, but ultimately I think if you’re persistent, you do good engineering, and you present your projects well, it will all be able to progress as planned.”

The Biggest Challenges Facing Miners, According To One CEO - YouTube

***

We finish the series of talks with an interview of Adrian Day, large mining investor and CEO of Adrian Day Asset Management.

These Are Must-Watch Factors For Gold, Says Adrian Day
The Federal Reserve’s monetary policies are still the most important drivers of gold prices,according to Adrian Day. “To me, one of the most important things, frankly, is the way the Federal Reserve has acted recently. When they saw the stock market volatility at the end of the last quarter, they blinked, and ‘blink’ is a polite way of putting it. I think they capitulated. And that is very, very positive for gold,” 

These Are Must-Watch Factors For Gold, Says Adrian Day - YouTube

***

Enjoy watching.
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By end February the investment community is eagerly waiting for the publication of the new Global Investments Yearbook. This publication is a continuation of "Triumph of the Optimists: 101 Years of Global Investment Returns" (Princeton University Press, 2002) by Elroy Dimson, Paul Marsh and Mike Staunton.

Emerging marketsThe 2019 edition is focusing on emerging markets, with particular emphasis on the Chinese stock markets: plural indeed since both the Shanghai stock exchange (SSE, trading since 1990) and the Shenzhen exchange (SZSE since 1991) have been included alongside the Hong Kong Stock Exchange (HKSE, since 1986 as a merger of Hong Kong exchanges operating since 1891).

The long run 'emerging markets' segment is varying in composition, since some present day developed markets were to be qualified 'emerging market' in earlier decades. Despite outperforming developed markets over several decades, emerging markets suffered several historic impairments. Those setbacks have caused the long run emerging market return to fall short of that of developed markets. The most important setbacks have been the nationalization of Russian enterprises following the 1917 revolution establishing the Sovjet Union, the nationalization of all national industries by the Peoples Republic of China in 1949 and the plunge of Japanese equity following the WWII defeat and the following hyperinflation.

Investing for the long termThis is the second topic covered in more detail. One of the main points of view is the historic sector rotation that has taken place throughout more than a century. Leading industries have dwindled and the present day major enterprises pertain to industries that didn't exist by the beginning of the 20th century.  Both the UK and the US stock exchanges are taken as examples.

Furthermore, comparison among three main asset classes (equity, bonds, bills - short term debt) proves equity to outperform in all developed markets and emerging markets with data available. With only one exception, bonds outperform bills over the long haul. Yet both categories lag equity. The 'golden age' for bonds is recent: the disinflation in most developed markets since the 1980's caused interest rates to decrease gradually thereby boosting real returns on bonds.  Bonds have been particularly poor investments during periods of rising inflation and escalating interest rates.

Return differentials between equity and bonds/bills (called risk premiums) are shown across 21 markets. 'Maturity premiums' are what differentiate long bonds from bills. Those maturity premiums tend to vary over decades long interest rate cycles.

Individual marketsThis last chapter is much abbreviated in this summarized edition as compared to the full printed version. Individual markets covered are the US, UK, China, Japan and Switzerland.  Aggregate data for European markets and for the World are suitable benchmarks.

LinksPress release  of the Credit Suisse Global Investments Yearbook 2019 - summarized version.
PDF direct link to the Credit Suisse Global Investments Yearbook 2019 - summarized version.
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Last Friday we witnessed a magnificent miner rally as gold broke above $1300 for the first time since mid June 2018.  However, miners have been disappointing for most of the past 18 months. There is no obvious reason why this dire situation would suddenly improve. 
Miners are quoting lower at any next time the same gold level is revisited. As we recall the last few times gold broke above $1300/Oz, those were the HUI gold miner index levels attained on those days:

Date
HUI
Gold
6/08/2014
241.7
1305.9
24/06/2016
237.9
1315.6
3/11/2016
219.0
1302.2
28/08/2017
209.1
1309.5
13/10/2017
202.8
1303.3
29/12/2017
192.3
1302.5
14/06/2018
182.1
1301.9
25/01/2019
158.6
1302.6

It looks even more obvious on a simple scatter graph:

HUI on the right axis, Gold on the left axis
Moreover, while the 'degradation' seems temperate at first, it accelerated since summer 2017.  This is nothing less than HUI dropping below its 'linear regression' it managed to uphold for about five years.

Last years' article "Gold miners persistently lagging the metal" exactly pinpointed what's going on.

The broken down linear regression 
A linear regression is expressing the dependency of HUI on the gold price in USD. This regression held for about 5 years since summer 2012 and until early 2017.  

HUI - Gold regression line, the blue dots cover the July 2012- July 2017 period
Before summer 2012, the (orange) HUI/Gold dots were above the regression line as the miners were valued higher for a given gold price, but the HUI was unable to keep track of the gold price as it ascended to its Aug 2011 all time high (in USD). Since Aug 2017, the (HUI, Gold) dots are systematically below the regression line, invalidating the linear relationship for the near future.

Linear regression parameters allow designing a graph with the HUI mimicking the gold price while the relationship remains valid:

Gold (left axis in red) and the HUI (right axis in blue)
While a regression relationship holds, the residuals (differences between the 'expected' HUI value and its observed value) are either positive or negative, but residuals tend to cancel out.  That no longer is the case since summer 2017.  Residuals have been negative ever since even though the gap temporarily narrowed early last summer.

Regression residuals have last been positive during summer 2017.
About the best we've got ever since is a reading close to zero.
Miners are not delivering to expectations
The idea sell-side analysts want investors to believe is 'leverage to the gold price'.  Indeed as the gold price is rising, the turnover of the gold miners may rise proportionally.  As costs usually don't escalate in the same way, earnings will rise which will trickle down to the bottom line:  higher margins yield higher profits.

Flaws are manifold:
Turnover may rise proportionally:  indeed if all production is sold at market price this is the case. However miners may have sold a production stream for an upfront payment needed to finance the mining investment. That production stream will typically sell at a price only little above production cost.  Miners may also have sold forward part of their production, locking in revenue certainty.  If during spring 2018 a miner has sold forward 12 months production for $1300/Oz, he has benefited during the downturn, but he will need to continue selling at $1300 no matter what gold rallies to during the months to come.

Most costs are in the local currency of the mine location.  Inflation may escalate production costs.  Both equipment and energy costs generally are USD denominated.  Rising fuel costs may erode mining margins.

Production costs at open pit mines tend to drift up as deeper ore layers are accessed. Eventually the mine will no longer be profitable at current gold prices, though there may still be gold ore left.  Mining indeed is 'a wasting asset'.

Ounces produced and sold are gone:  miners will need to find new deposits or find extensions of deposits being mined in order to stay in business. Especially during the gold bull market, many miners have overpaid for new deposits, many of which didn't deliver to expectations.

During the miner bear years, the main focus has been on cutting costs.  Exploration costs are about the first to be reduced.  Though production can continue,  reserves are being depleted.  Mining sites with above average production cash costs may attempt high grading their deposit to bring the cost down. This most often shortens the mine life dramatically:  a soon as high grade ore has all been mined, cash costs will escalate since only lower grade ore is left.

Conclusions
Gold rallying is like the weather getting better: it brings short relief for the miners, but it doesn't fundamentally alter their outlook.

This time we need a climate change: miners need to deliver on expectations:  grow their reserve base enabling profitable production for decades to come. Moreover production and earnings growth is needed on a per share basis. Raising capital and diluting shareholders is a recipe to scare away investors.

As 'peak gold' is luring behind the corner and more mining majors are lowering their production volume forecasts, investors have grown wary; they are anticipating more possible unpleasant surprises and have become more reluctant than ever to overpay for miners.



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Unlike after previous FED rate hikes, precious metals don't quickly bounce up but continue their losing strike. A stronger USD is only part of the story.

Gold has been bottoming near the early December 2017 low last Thursday June 28. Despite an uptick on the last trading day of June the $1252.4 close isn't what gold investors had in mind when they saw the metal rally to gain $1300 by year end. The below graph runs till last Monday. A first plunge mid May brings the yellow metal below $1300 for the first time in 2018. The timid recovery is smothered after the FOMC meeting raising the FED interest rate with another quarter. The narrative is that four rate hikes are not to be excluded in 2018 and that the FED monetary policy no longer is accomodative. This brought about an abrupt rise in the USD index. That last rise proves not sustainable as the USD index is unable to hold on to the 95 level.

Gold price in USD in the first half year 2018 (click to enlarge)
Inverse of the USD index. A perfect correlation with gold implies that the graph profile should look identical.
  (click to enlarge)
The USD has been weakening till about February, trading sideways till mid April. The green back started strengthening throughout most of May with a second peak after the FED rate hike. Gold is behaving like a foreign currency, mimicking the inverse of the USD index, though imperfectly. Despite the USD index off its high, the yellow metal continued its unabated descent till last Thursday.

When plotting the gold price in USD against the dollar neutral gold price (graph provided by Kitco) it is obvious that the rally in January was entirely due to the USD slide. The dollar neutral gold price was not in an uptrend. It bottomed by mid March.

Gold priced in USD and Kitco's dollar neutral gold price.
The opposite holds from mid April to early June when the gold price slide was completely due to the USD strengthening. Kitco's dollar neutral gold price maintained its moderate uptrend. Since the FED rate hike however, gold is sliding rapidly, both in USD and in foreign currency: the gold slump aggravated.

July continuation
The first trading week in July always is atypical, because of national days both in Canada and in the US. It wasn't any different this year. On July 2nd, gold closed at $1241.5 on Comex equalizing the December 11 trough. Technically this is important as it invalidates the thesis that successive lows need to be higher in order to confirm the gold uptrend since the December 2015 bear market low.

Equally important from a tactical point of view was the bounce on July 3rd to $1252.4.  Apparently the July 2nd bottom was the usual short selling exhaustion by US speculators unwilling to hold on to their short position over July 4th. 
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Early 2018 we witnessed gold rallying rapidly to what was to be its 2018 high. Till about mid May, the yellow metal managed to uphold $1300. Miners however have mostly been lagging the advance of gold, with the HUI/Gold ratio in decline and bottoming early September, after gold made its low by mid August.

HUI/Gold ratio - Daily observations year-to-date (click to enlarge)
Contrarian gold miners lag gold as it advances to its late January high, which was also going to be the 2018 high. As gold remained strong, mining investors were increasingly skeptical and sent miners lower, with the HUI/Gold making a mid March relative low.  Still contrarian, miners ignored initial gold weakness in May and June, as the gold slide was countered by a rising USD and general stock markets were recovering from a first sell-off.  By the time HUI/Gold peaked early July, miners seemed to anticipate a gold recovery.  Yet the opposite happened, sending miners and the HUI/Gold in a tailspin by mid August. You find the last 6 months in better detail below:

HUI/Gold ratio - Daily observations over the last 6 months (click to enlarge)

HUI/Gold made a nice inverted head and shoulder pattern from mid Aug to early Oct, which was pinpointed on Sept 29.  However enthusiasm proved short lived. In the second week of Oct miners rallied as gold was breaking above $1200 again. However the rally was followed by a sell-off two weeks later, though the yellow metal upheld $1200 until well into November. HUI/Gold then bottomed as gold kept flirting with the $1200 resistance. The ratio has been in a slight uptrend since then, however unable to lock-in any meaningful advance, despite gold firming to $1200 on Dec 28. Speculators might attribute the poor miner advance after Xmas to the roll-over of the COMEX contract to Jan 2019 as leading month, adding some contango premium to the gold price. Tax-loss selling always is yet another good excuse for miners to lag upon any hesitation of the gold price during Nov and Dec.
Six months ago, HUI/Gold posted at 0.14 with the yellow metal a few percent lower than where it stands at today. As soon as investors run out of excuses as why to sell regardless the gold price trend, we may revisit that 0.14 level again. That wouldn't be exaggerated at all, given that HUI/Gold was at 0.155 by the end of 2017 with gold at $1300. The yellow metal is down only 1.7% over 2017, despite USD strength and four rate hikes.

Long term retrospect
The below graph with weekly observations of HUI/Gold over three years, shows the 2011-05 bear market bottom (actually by mid Jan 2016) followed by the euphoria of the gold and miners breakout and the new slide to bear market valuations.

HUI/Gold ratio - Weeky observations over 3 years (click to enlarge)
Moving averages on a weekly graph standard are 50 and 200 weeks. The red longest term moving average has been trimmed to 150 weeks or nearly 3 years. It is almost completely flat, essentially showing the bear market bottom. HUI/Gold stays below the declining blue 50 weeks moving average throughout most of 2017 and 2018. 

Table I
Last
Up from Min
Min
Max
Down from max
Gold
1280.4
13.5%
1,128.2
1,357.7
-5.7%
HUI
158.1
18.0%
134.0
221.5
-28.6%
Table 1 illustrates where gold and the HUI miners index currently are relative to their 2017-2018 closing max and min. Note that the closing max and min for gold and for the HUI were not on the same date.  Gold only quotes 5.7% below its rolling 24 months high and 13.5% above its low.
The HUI index on the contrary has much more work to do, quoting 28.6% below its rolling 24 months high.

Silver miners losing their edge
An aggregate idea of what's going on in the narrow niche market of silver miners is not evident. The best proxy around is the Global-X Silver Miners ETF with ticker SIL. The below graphs show SIL/Silver year-to-date and over six months.

SIL/ Silver ; daily observations since the beginning of 2018

SIL/ Silver ; daily observations over 6 months
The situation among silver miners is actually worse than that for gold miners. SIL/Silver didn't put a 2018 low in September. Instead the ratio kept trending down with new lows in November. The mid Dec recovery was mainly due to the rally of streamer Wheaton Precious Metals, which is a key component in SIL. The recent recovery of the silver price above $15 is again met with disbelief as miners are -at best- are responding timidly.

Silver mines long ter)m retrospect
The long term retrospect over the complete 2016 boom-bust is followed by a gradual erosion of the SIL/Silver ratio over 2017-2018. The 150 weeks moving average (red) still signals an uptrend, indicating that SIL used to withstand the silver slide (about 70% off since the speculative Apr 2011 top) better than gold miners could cope with the gold slide (by now only about 30% off the Aug 2011 all-time high).
SIL/Silver ratio - Weeky observations over 3 years (click to enlarge)
Yet SIL/Silver keeps below its 50 weeks moving average over most of 2017 and 2018, much in the same way as we found for HUI/Gold.

Repeatedly, SIL/Silver has been weakening as silver recovered while occasionally also showing resilience as silver was sliding. The rationale behind may be important secondary production streams of base metals. A silver miner earning about half its revenue from copper won't rally excessively upon silver strength as the price of copper stays put.


Canadian Gold and Silver Mining indices
How gold miners are performing is shown by the capitalization weighed gold miners index of stocks included in the Gold Miner Pulse database (yellow diamond symbols). Note that most quotes are in CAD, which has been fluctuating to the USD. The blue graph shows the GMP silver miners index. It has been losing its edge lately.The long term depreciation of the loonie mitigated the miner loss during gold miner bear market.

GMP list based (and capitalisation weighed) gold (yellow dots), silver (blue) and equal weight (red) miners indices. Reference 1000 on Nov 19, 2010  (click to enlarge)

The third index added uses equal initial weights of all (silver and gold) miners from the GMP database. Because of its simple weighting scheme, comparing this index to the capitalization weighted indices gives a fair idea of how junior miners and explorers fare as compared to the large miners.
How we got so deep into trouble is best illustrated when showing a long term graph of those capitalization weighted miners indices. The revival after late Jan 2016 healed the last leg down of the miner bear market. We briefly topped the May 2013-Oct 2014 trading range.

Long term graph of the GMP list based (and capitalisation weighed) gold (black), silver (blue) and equal weight (red) miners indices. Reference 1000 on Nov 19, 2010. - Data till Dec 29, 2017 (click to enlarge)

The silver miners index rose till 1400 in April 2011, peaking three weeks earlier than did the silver price. The silver miners index also posted a higher maximum during both the March 2014 and June to early August recovery than it did in the August 2013 recovery. The gold miners index and the equal weight index did not peak higher at any of the failing 2014-15 recoveries than they did in August 2013. By January 2016 silver miners nearly completely lost their edge relative to gold miners, yet the recovery proved more vigorous. The below long term graph covers over three years: the end of the bear market with miners bottoming by Dec 2015, the 2016 boom-bust over the tedious months early 2018, with miners unable to match gold strengthening. Miner quotes were jittery after gold plunged below $1200. Towards end 2018 gold strengthened to $1280 with miners recovering timidly.

Mid/Long term graph of the GMP list based (and capitalisation weighed) gold (black), silver (blue) and equal weight (red) miners indices. Reference 1000 on Nov 19, 2010. - Data till Dec 28, 2018 (click to enlarge)

Performance graph


There is an important performance disparity among the gold and silver miners of the GMP database. Too many laggards seem moribund. The median (or middle) miner (with an equal number better and worse) is losing 71.53%: tripling doesn't bring you to break even. The average loss posts at 48.49% as the performance distribution is slanted towards the (few) high gains.

GMP Miners sorted by loss to gain since inception on Nov 19, 2010. Click to enlarge

There are 21 miners/explorers losing 90% or more, with 13 thereof down over 95%.  At the opposite side only 13 miners are still quoting above their Nov 2010 mark, led by Osisko Mining; 3 stocks have doubled. The top 4 miners are omitted in the above graph to avoid scale expansion, but you find the top-10 in full detail below:

GMP elite miners, sorted by gain since starting observations in Nov 2010 using a logarithmic view with minor ticks 10% apart in the bottom decade and 100% apart in the next decade - Click to enlarge


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Precious metals in a downtrend over 2018 is a story of the more obvious. The failing gold rally early in the year, the breakdown of silver leading to a gold/silver ratio now over 86. Platinum is another horror story: longs were lured in a failing rally of this denser precious metal. Yet by mid August, platinum plunged to $767.  Even during the four year gold bear market, platinum had not seen such price level. Today (30 Nov), Platinum again is to close below $800/Oz, making the Gold/Platinum ratio rise to 1.533. Two ounces of gold now buy over three ounces of platinum. 

Diverging trends: Palladium made another multi year high of $1174 on Nov 29, while today Pd was even peaking at $1190 intraday before profit taking drove the price down again.
The counter-trend precious metal by excellence however is rhodium. This rarest metal completely ignored the 2016 gold recovery. On the contrary: Rhodium slid below $600/Oz as gold peaked. The difference can't be larger now. An ounce of Rhodium buys about two ounces of gold. The rhodium uptrend has been ongoing for over a year, with only minor hick-ups.

1 year rhodium prices.
Palladium peaked by mid January at $1122 only to give back much of its rally gains and meander along $1000/Oz until summer.  Mid August, Pd even dropped below $900, plunging to $842 on Aug 15.  Palladium has been outperforming gold during autumn, leading to its $1190 peak this morning.

The Palladium price has been more correlated with the other precious metals, plunging to a mid August low. Yet the Palladium recovery proved more resilient.

On balance gold slid about $80/Oz over 2018 till end Nov. That's a 6.2% decline.  Silver on the contrary slid 16.3% year-to-date or about 10% more. The Gold/Silver ratio now is reaching a level not seen in several years:

Gold to silver ratio over 2018
The gold-silver ratio made a recovery mid June, when the white metal eased only little while gold was declining. However the trend quickly reversed, only temporarily interrupted late September.

This brings us to the last graph: the gold to platinum ratio, which isn't any better:

Gold to platinum ratio over 2018
The gold-platinum ratio worsened more rapidly than did the gold/sliver ratio. There has been no recovery and when after Halloween there seemed to be some hope for a trend reversal, Platinum again slid beyond compare. On Nov 30, the Gold to Platinum ratio equals the early September peak level.
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The Randgold - Barrick merger lifted enthusiasm within the mining sector. As the metal turned up with gold breaking and holding above $1200/Oz (despite a rising USD and interest rates creeping up), miners seemed ready for a lengthy rally, especially after HUI/Gold completed an inverted head and shoulders pattern.

However enthusiasm proved short lived. Though gold held well above $1200, gold miners were slain during the stock market correction. As quite often, the volatile mining sector was down more than the broad stock market, despite more healthy fundamentals. Investors are scratching their heads.

Inverted head & shoulder pattern of HUI/Gold
HUI/Gold, daily observations over the last six months.
After completing the inverted head & shoulders pattern, HUI/Gold strengthened according to expectations. However enthusiasm waned quickly. We now witness a lifted left arm with the hand showing its middle finger...

If recent action among gold miners is the usual continuation of disappointments wearing out investor's patience, what silver miners made of it is even worse. For aggregate silver miners price action the Global-X ETF SIL is used. Its price is compared to that of silver bullion.

SIL / Silver, daily observatoins over the last six months
Repeatedly, SIL / silver is hitting a bottom near 1.60.  Every recovery attempt has been dead in the water. SIL/silver is beneath its 50 dma and its 200 dma. The decline has been ongoing for most of 2018.  Silver miners have lost their edge over their gold mining peers.

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