A Point To Ponder: If Gold's Rocketing Up, Why Not Gold Stocks?

This point's been made by Cam Hui, a "Humble Student Of The Markets." He calls attention to the fact that three major gold-stock indices have yet to confirm their early-2008 highs even though gold itself has shot up way past its own.


There's an easy answers to his question: the financial crisis drove gold stocks down along with other stocks. Each gold index saw a decline of 66-75%; subsequently, each has about tripled. The leverage has been there, but from a panic-low base. No-one knew that gold would hold up back then; most everyone had assumed that gold would be pilloried too. It seems that the financial crisis saw a "buying opportunity of a lifetime" for gold stocks.

I should add that the low for gold stocks was hit in November 2008, not in March. A gold junior I'm watching, currently at 14.5 cents, traded at two cents at its November '08 low.


Update: Adam of Gold Versus Paper concludes that the divergence means that gold stocks present opportunity - he's careful to specify "run-of-the mill" ones, presumably producers - and notes that gold stocks show no hint of bubble-like behavior.