Gold stocks are inexpensive and have potential for catching up.

Last Updated: 7. Februar 2024By

The HUI Gold Bugs Index, which tracks the performance of international gold companies, reached its peak at over 600 points in 2011. However, at that time, the price of gold was about $100 lower than it is today. How can this be?

The reason for this is that the average costs for gold production are much higher today than they were in 2011. Due to the constantly rising costs of gold production, a higher gold price is needed over time to justify the same level for the HUI.

Therefore, the price of gold must become more expensive simply because its production is becoming more expensive.

The only question that remains is: Are gold stocks currently expensive or cheap?

The answer becomes clear when looking at the HUI-Gold ratio:


Currently, gold stocks are as cheap as they were at the end of the last downward cycle. But it’s not just compared to the price of gold that shows gold mining stocks are currently cheap. A comparison to general mining stocks shows that gold stocks are even cheaper than they were at the end of the last downward cycle in mining, and even cheaper than during the great financial and economic crisis.


And this is despite the fact that the price of gold has been in an uptrend compared to the industrial metal index GYX since the first half of 2022.

This clearly shows that gold stocks have a lot of catching up to do.

Conclusion: Gold stocks have strong catching-up potential. Gold stocks are not only cheap compared to gold, but also compared to mining stocks. The price of gold itself still has massive catching-up potential. With the increasing and strong purchases of global central banks, especially those of emerging markets, the price of gold is firmly in the saddle of its long-term uptrend. But as the gold price rises, the undervaluation and therefore the strong catching-up potential of gold stocks also grows.

I still hold the opinion that gold is a buy at every dip that the precious metal can still take. And gold stocks from companies with strong balance sheets, a strong growth profile, and convincing gold and mining projects should now be part of every portfolio. Especially since many of these gold companies also pay very attractive dividend yields.