Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
The price of gold fell 3% last week and continued to drift lower on Monday, hitting fresh four-month lows at $1,243 an ounce.
Gold remains some 4% to the upside for 2014 but is down $135 from highs reached mid-March as the rally on the back of safe haven demand and bargain hunting loses steam.
US stock markets however have been on an incredible winning streak.
In a new note, the research team at ETF Securities points out that the gold to S&P 500 ratio has fallen close to its lowest level since early 2008.
The institutional investment advisers based in London says this begs the question: “Is gold a cheap insurance option right now?”
“The VIX equity volatility index declined to near its lowest level since 2007. Meanwhile the S&P 500 extended its longest winning streak above its 200-day moving average since 1998, helping drive the gold/S&P 500 ratio to 0.65, near the lowest level since January of 2008.
“In our view it is difficult to believe volatility can remain this low indefinitely. Therefore now may be a good time for investors to consider looking at gold as insurance against a potential rise in volatility.”
Source: ETF Securities
