Gold mining stocks have been hammered since 1995 and especially after 2011. They remain below 1995 levels. A cursory glance tells us that mining real money – aka gold – is not valued by the market. Instead, capital flowed into Internet stocks, housing, Facebook and other bubble stocks. Internet stocks crashed in 2000, housing crashed in 2006-8, and a crash in bubble stocks will come.

Examine the chart of the XAU – an index of gold and silver mining stocks. The HUI index of unhedged gold stocks looks similar.

The XAU bottomed in January 2016, a few days after gold bottomed in December 2015. The XAU has risen for over two years and is up 118% from the January 2016 low.


Examine the ratio of XAU to Gold. The ratio has declined for 20 years because the stocks have been WEAKER than gold. When those gold and silver mining stocks “wake up” they will fly. The ratio’s slight upturn in the past two years is promising but not yet convincing.


The NASDAQ bubbled higher from 1996 – 2000 before crashing, high to low, by 84%. Too far and too fast always correct. The ratio of XAU to NASDAQ 100 shows the incredible valuations given to NASDAQ stocks in 2018 and the low valuations for gold mining stocks.

The ratio of the XAU to the NASDAQ 100 has dropped from over 0.80 (thirty years ago) to about 0.01 – a decline of over 98%. Tech stocks will correct lower and the XAU will rise much higher. The ratio currently sits at the level from 9-11, after which gold and silver rocketed higher.


  • Gold stocks as measured by the XAU and HUI have been weak for over two decades. They will spike higher someday, maybe soon.
  • The gold to XAU ratio shows that gold stocks are severely undervalued compared to gold. That ratio will reverse and may have begun its climb.
  • The declining XAU to NASDAQ 100 ratio shows that tech stocks have rallied and mining stocks have plunged. The $ trillions borrowed into existence after the “debt floodgates” were opened in the late 1990s flowed into tech stocks, paper assets, debt paper and housing, but not mining stocks.
  • A reversal higher in gold and gold stocks has begun. A reversal lower in tech stocks appears underway.


The gold to silver ratio indicates zones where gold and silver are priced too low or too high. Since silver prices move farther and faster (both up and down) than gold prices, the ratio bottoms at metals market peaks. The ratio is high when silver and gold are unwanted. Note the boxed silver prices when the ratio peaked.

The graph of the ratio for the last 37 years shows the bear market lows in gold and silver in the early 1990s, the late 2008 crash in both metals, the weakness in metal prices at their low in late 2015, and again in early 2018. In spite of the fact that gold prices are up 29% from their December 2015 lows, the current high ratio shows gold and silver are both undervalued and likely to move much higher.

When gold moves higher I believe the mining stocks (XAU) will rise much faster than gold. Silver will move, based on 50 years of history, farther and faster than gold, but not as much as mining stocks.


  1. Too much debt! The official U.S. debt is $21 trillion. Nobody expects that debt to be paid down to zero. Few expect the Treasury will default on the debt (unthinkable) so the ONLY option is devaluation and inflation. Borrowing trillions of dollars and monetizing trillions more will devalue the dollar and create consumer price inflation.
  2. The dollar has devalued since 1913. Otherwise gold would be priced near $20.67 and gasoline would sell for pennies per gallon. Inflation and devaluation are the only answers. Per Richard Russell, “Inflate or Die!”
  3. Bond market crash! Ten year rates bottomed in mid-2016. Five year rates bottomed in 2012. The bond bull looks dead.
  4. Chinese and Russian are working to bypass the SWIFT system and avoid international trading in dollars. Expect this dollar bypass to accelerate as demand for dollars decreases.
  5. Trading oil for yuan instead of dollars. Potentially more deadly is trading oil for gold sourced from western banks whose vaults are nearly empty.
  6. Russian military power. If cruise missiles can be shot down over Syria (as reported) and carrier groups are sunk, the dollar will fall. CNN will minimize reporting on both of the above, but the dollar index will confirm the power shift.


  • A falling dollar index and a bond bear market will encourage more debt, monetization and higher metals prices.
  • Gold and silver should rise for several years. Mining stocks will rise more and faster.
  • Gold Stocks have doubled since January 2016. The continued rally from here should be impressive.

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Gary Christenson