The following charts focus on the ratio of gold to the HUI Gold index. The NYSE Arca Gold BUGS Index is a modified equal dollar weighted index of companies involved in gold mining. BUGS stands for Basket of Unhedged Gold Stocks or in other words,stocks which are most likely to deliver outstanding earnings in a gold bull market. The monthly chart clearly shows how gold mining stocks have suffered in comparison to the gold price over the past 20 years.
The ratio of gold to the HUI index has risen from 1.66 in January 2006 and reached an all-time high in September 2015 if 10.28. Since then the ration has oscillated between 10.28 and 4.92. The ratio currently stands at 7.07.
The weekly chart suggests that the gold to HUI ratio in approaching oversold levels (14 week RSI at 33% and the MACD-V indicator at minus 150). It is now feasible that gold stocks will experience a bout of profit-taking in the weeks ahead with the ratio rising towards the 8.40 level, where fesh accumulation could well prove profitable.
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