An Introduction
Prevailing gold prices overwhelmingly drive gold mining profits and, looking at the performance of 4 gold mining category ETFs – producer, developer, explorer and royalty/streaming – relative to the current gold bullion price (referred here as the GE-to-GB or GE/GB Ratio) provide the extent of under- or over-evaluation of the stock category where the higher the ratio the better. Both the Ratio and the MunAiMarkets Gold/Silver ETFs Model Portfolio were UP w/e April 18th. Below are the details:
The GE/GB Ratio
The Ratio ended 2024 at a very low level and, historically, very low levels have always been followed by major gold stock up-legs according to Adam Hamilton – and gold miners tend to not only mean revert to normal GE/GB levels, but overshoot proportionally to the upside. The GE/GB Ratio was UP 3.4%, on average, this week and is now UP 3.4% MTD and UP 14.8% YTD and that portends to a coming massive surge in gold stocks – and silver stocks, too.
The MunAiMarkets Gold/Silver ETFs Model Portfolio
- The VanEck GOLD Miners ETF (GDX): UP 2.5% w/e April 18th; UP 11.7% MTD; UP 50.2% YTD
- consists of producer companies that operate fully functioning mines that extract and sell gold
- # Holdings: 63
- Average Market Capitalization: $23.0B
- GE/GB Ratio: Unchanged w/e April 18th; UP 3.4% MTD; UP 18.6% YTD
- The VanEck Junior GOLD Miners ETF (GDXJ): UP 4.7% w/e April 18th; UP 12.8% MTD; UP 50.0% YTD
- consists of developer companies that take over once explorers find a promising deposit conducting feasibility studies to determine if the deposit can be mined profitably, work on securing permits, financing, and planning the construction of the mine.
- # Holdings: 88
- Average Market Capitalization: $6.0B
- GE/GB Ratio: UP 2.0% w/e April 18th; UP 4.5% MTD; UP 18.1% YTD
- The Sprott Junior GOLD Miners ETF (SGDJ): UP 2.9% w/e April 18th; UP 9.6% MTD; UP 40.3% YTD
- consists of explorer companies that are searching for new gold deposits
- # Holdings: 35
- Average Market Capitalization: $4.0M
- GE/GB Ratio: Unchanged w/e April 18th; UP 1.5% MTD; UP 10.9% YTD
Sub-Total: Gold ETFs UP 3.5% w/e April 18th; UP 11.5% MTD; UP 47.1% YTD, on average; GE/GB Ratio UP 0.6% w/e April 18th; UP 3.3% MTD; UP 14.8% YTD
- The Global X Silver Miners ETF (SIL): UP 3.3% w/e April 18th; UP 5.2% MTD; UP 30.8% YTD
- consists of explorer companies that are searching for new silver deposits by conducting geological surveys, drilling, and sampling and are referred to as “junior” mining companies.
- # Holdings: 35
- SIL to SLV Ratio: UP 2.2% w/e April 18th; UP 11.0% MTD; UP 16.5% YTD
In addition, below is how a representation of royalty/streaming company ETFs performed MTD and YTD:
- The U.S. Global GO GOLD and Precious Metal Miners ETF (GOAU): UP 4.4% w/e April 18th; UP 13.3% MTD; UP 47.8% YTD
- consists of companies (merchant “bankers) that provide alternative financing to mining companies by purchasing future production (i.e. streaming) or revenues (royalty) in exchange for upfront cash payments.
- # Holdings: 28
Summary
In total, the above 5 gold/silver related ETFs encompass 87% of the gold/silver ‘mining” sector (i.e. 253 companies) and they were UP 3.6% w/e ending April 18th; UP 10.5% MTD and UP 44.0% YTD.
In addition,
- The SPDR® Gold Shares ETF (GLD) was UP 2.8% w/e April 18th; UP 7.8% MTD and UP 26.4% YTD and the iShares Silver Trust ETF (SLV) was UP 1.2% w/e April 18th; DOWN 4.7% MTD and UP 12.2% YTD.
- The Gold-to-Silver Ratio is now UP to 103.6 which is UP 1.5% w/e April 18th, UP 13.1% MTD and UP 12.6% YTD suggesting that there is significant room for gold to decline or silver to rise to bring the ratio back into line within its historical range. My money is on silver being the precious metal that make the big move going forward.
