Gold miners underperform physical gold
The speaker expressed skepticism toward gold mining equities, noting they have historically devalued relative to the physical metal and behave in ways that defy basic logic.
The argument
The guest highlighted that major miners like Newmont have gone down in value when priced in gold, making them highly unpredictable. While tempted by a 'short gold, long big gold miners' pair trade to capture mean reversion, the speaker avoids miners due to this lack of structural understanding.
The thesis, stress-tested
✓ What validates it
- ✓Continued divergence of the HUI/GDX indices relative to spot gold prices
- ✓Earnings compression among major miners despite rising gold prices
▸ Risks discussed
- ▸Miners could suddenly re-rate and close the valuation gap with physical gold
- ▸High dividend yields on major miners may offset underperformance
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