Have mining companies’ stock valuation ever been more undervalued relative to the price of gold? As the $XAU:$GOLD ratio chart below illustrates, the answer is NO!

After cutting costs to the bone in 2013, mining companies in 2014 have resorted to decreased production and shuttering mining operations. As the second chart below illustrates – mining companies, as represented by $XAU, are presently valued at the same level as they were when gold traded as low as between $350 – $500/oz! 

Perhaps these “whacked-out” metrics will matter someday, maybe even soon. Maybe even to mining company executives – who apparently are finding it more convenient and cost effective to buy their metal on the open market rather than actually mine it, and who – in response to the ongoing decimation of their industry, as well as their investors’ portfolios – we hear from leadership the collective and thunderous sound of…

…crickets. 

About Ruben Varela, Jr. 

Ruben is an independent trader specializing in the precious metals sector. Email: rtvarela@yahoo.com. The foregoing is for entertainment and educational purposes only and not investment advice. Please do your own research before investing.