Are Gold Miners Cheap or Undervalued? Or Both?

Gold Miners are definitely cheap as multiple valuation metrics are at historically low levels. When viewing a history of valuations going back as far as the 1980s we find current valuations indicating a secular bear market. Valuation indicators last peaked around 2003-2006.

There is a difference between price and value. Cheap refers to price and undervalued refers to intrinsic value against price. The gold mining sector is cheap and many companies are arguably undervalued. But not everything is undervalued.

Find the quality companies as those are the ones that are undervalued. Companies of a lesser quality are not undervalued but could be if Gold is breaking out and prices remain low.

0:00 Intro
0:05 Intro Comments
1:35 Gold Stocks Fundamental Indicator
6:15 Gold Stocks Valuation Charts
12:17 Summary
14:35 Conclusion

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Is Jordan this video is being recorded on the early evening of Wednesday January 24th 2024 thank you so much for tuning in if you haven’t already please subscribe to the channel I would really appreciate it thank you and in this video I’m going to talk about are gold stocks cheap or

Undervalued and uh you know this video this is not to uh come across as like I’m a know-it-all thing and uh you know there’s arrogance and all that but it it’s just something I want to touch on because constantly we see things in our sector and Industry where you know

Researches put out or tweets and those types of things where gold stocks are undervalued like this shows are undervalued the Huey gold ratio gold socks against gold it’s in the toilet it’s at an all-time low it means everything’s undervalued and I mean that might be true but we have to make a

Distinction I mean there’s a difference between something being cheap and undervalued and clearly the sector is cheap I mean we we know that I mean I’m going to show you these charts in this video you’ll see that that the sector in the miners are cheap but are they really

Undervalued I mean long story short I think we’re I mean things are almost so cheap that we’re getting to that point and certainly um you you you have to look at uh Miners and uh you know uh all the compan on a caseby casee basis

Um because I I think you you can’t say that uh you know the entire sector is undervalued I think some of it is just really cheap and then some of it is really cheap and undervalued but we’ll get more into that I’m going to go through some charts

Here so first things first um you know over long periods of time the best indicator at least for me for fundamentally tracking you know where the gold stocks going to go or how they’re going to perform it’s actually not the gold price it’s actually the inflation adjusted gold price and so let

Me explain so in this chart we have gold here this is gold divided by the CPI the inflation adjusted price this is the baron Baron’s gold mining index and then this is the XU divided by gold I just I wanted to show a different index uh divided by

Gold and um so you know I I’ve lined up here the secular bull markets and um you know so gold against the CPI the inflation adjusted price I mean this Gold stock index going back um I mean look at this how yeah I mean it made new

Highs here but barely look at the inflation adjusted gold price so the the super long-term Trend here in this in the shape of the chart and the curves it’s more it’s far more in line with gold stocks and actually the price of gold and and you know this is this is um

Again so you you look at now the baren gold mining index in the last I don’t know three four five years or so it’s a little bit stronger than the X the huie and GDX so just a bear that in mind but we can see I mean there’s there’s the

Recovery the move here but it’s still well off the High I mean it’s not you know eight I mean this would have to go up more than about 50% or more than that uh to get to an alltime high I I mean I don’t have GDX handy but I know it’s

More than that um and we can we can see here just comparing with gold against the CPI I mean 28 August 2018 to August 20 uh you know you have this move here gold against the CPI here now you have the you know the big retrace not a huge

Pullback but you you know you have that and um again so this is a little bit um stronger than all the other like it made a new high here which you definitely did not see that in GDX and the Huey and the X um but you know it

Came back down to rebounded a little bit you know I have this vertical line here because um fundamentally this is where there is um I I think there is a difference because the inflation adjusted gold price and this is the last year nine months or so you know in

Recent months it did move up so you have a higher high here in this but you’re looking at you know the baren gold mining index um you know you have a higher low so um now granted the inflation adjusted gold price I mean if we’re looking at five or

10 years and again we’re looking at these charts very good indicator so doesn’t necessarily mean it’s going to be a perfect indicator over six months or a year even two years but nevertheless I think there’s a bit of a deviation here and I think this is something we’ve also seen in valuations

Over the last 6 to 12 months where they valuations have actually come down so what I’m trying to say is the inflation adjusted gold price tells you um I think this is since the 22 bottom you know this has been going up a little bit that

You haven’t quite seen at this what you normally would see in the performance of the gold stocks and you know that that to me is I think because valuations have actually been going down um recently and you uh B you know big picture the best performance in uh gold stocks divided by

Gold um you know other than this period right here which I don’t want to get into um is really when you have a secular bull market and gold and so that’s been the that’s been the problem I mean look the gold price is only a little bit above where it was

13 years ago think of how much costs have gone up since then so that’s a big reason why um you know this ratio has or gold stocks have underperformed gold so you know once we get a a bull market a new secular bull market the gold stocks are going to outperform Gold not

Necessarily the entire time or throughout every gold period but that’s really what has been lacking um so getting into some of the valuation uh this is something put out I think John haway put this out this has been making the rounds I have to be let

Say I have to be honest I mean I’m always honest but I’m not really sure what this indicator is I mean it has something to do with the gold price um this this is showing you know the the the miners what color is this silver green I

Don’t know color blind but this is showing based on this indicator it’s saying that the gold stocks are reflecting like a $1,000 gold price um you know based on this this is the premium above spots we can see here you know this was a when there was a premium

And you know since then it’s been in negative territory um so yeah I mean this says that you know I’m eyeballing it the gold stocks are reflecting around $1,000 an ounce that’s just that’s not the case I mean it’s almost 50% lower the reality is it’s mostly because costs have gone

Up so much in the last three years and yes valuations have also factored into that but it’s mostly cost it’s not mostly valuations now maybe if you measure it from the peak um yes from the 2020 peak in August valuations obviously came down quite a bit since then but margins have

As well so the yeah this valuation indicator it’s making the rounds but I it’s I’ve read over what they said in the thing a couple it’s not clear to me what this really is and I just I don’t think it really I don’t think it’s a good valuation indic it doesn’t reflect

Reality I mean saying that gold stocks are trading if they’re a thousand you know thousand do gold that to it just reminds me of you know people saying oh well gold stocks are trading is if gold is at, 1300 or you know 1,200 no they’re yeah they’re because that they’re

Trading it looks like that because that’s what the margins are they’re the same today as they were at that gold price several years ago um so this is one of the most recent uh valuation charts that has come out uh so this is from Capital markets um Junior miners I’m color I

Don’t know what the hell this color is I mean what is this poop red Brown um sorry uh so yeah based on this um valuation indicator you know we can see that um this is price to net asset value so this is we can see this is way off off from

You know what there was in the early 2000s th this one’s senior minor I’m a little bit surprised how in 2016 I mean that the premium to Discount was this high and you recently it’s this low um so I like the fact that this goes back

25 years but to me it’s it’s still kind of erratic you know not not the best to me but I do think um you know I do think what it’s V is reasonable that we are at um you know a significant low point for valuations now

These are some other charts you know uh now I I prefer the the price to cash flow or the Enterprise Value to eah I really prefer those um just because you get you know you just get cleaner um you know cleaner data there’s like a cleaner Trend whereas something

With this I mean it’s just really erratic to me even though it’s you know the the trend is like this um in juniors um okay so this is interesting this is um from uh GBM Scotia Bank so this is priced to nav but it’s going

Back I mean this is going back almost 40 years so I I I at least like the really long time frame you can see this was in a range and then 2012 you know really collaps so uh if we’re looking here I mean this is secular bull market secular

Bar market so that’s clean so that that makes sense now this is uh price to EA Enterprise Value to EA I I mean this is a couple years old this one’s a couple years old too I love charts like this that go back to 1985 this paints a really clear

Picture and we can see you know when this is secular bull bare Market territory versus when it was in a secular bull market here and you know you really had valuation Peaks here I want to say like in the mid 2000s you go back to what is

It here so or even 2003 I mean 2003 2005 2006 and that was before the GLD ETF came out I think that was 05 uh so that’s something to keep in mind that’s definitely had an impact but you know nevertheless secular bare Market secular bare market valuations and this is going back to

2013 price to cash flow would love to see this going back farther and you know 2013 2015 price to cash flow for me those were the lowest valuations that we had really ever seen now this is about a year old so I would think we’re um you know and this is the S&P

TSX you know a different index so these these value they’re all based on different indexes you know because there’s so many gold mining indexes there’s not like a clean one like the S&P 500 unfortunately so um but I I do think recently this is probably back down here so I know it’s a

Long video a lot of rambling from me but um you getting back to this are gold stocks cheap or undervalued you know I thought about this like a couple weeks ago and I was just prepared to be a contri and say no they’re not undervalued they’re just completely

Cheap but after going through these charts and thinking about it yes we know that they’re absolutely cheap because cheap is just it’s like Warren bu whatever Warren Buffett said price is what you pay value is what you get yes the gold stocks are really cheap they are I mean we’ve seen we’ve seen

Valuations come down in the last six to 12 they were already cheap before that uh but they have come down quite a bit are they undervalued um I think now value depends on if something’s undervalued I mean that means the intrinsic value is worth

A lot more than what the price is and I think for Quality Juniors a lot of quality mining companies the ones that are the strongest now and have the best fundamental I think they are undervalued right now and you know for the entire sector

As a whole you know we will see but you know last thing I want to point out is um and I’m clicking around here valuations tend to um look this is after the huge pop in 2016 the huge pop in 2020 you know uh do we see that here oh

It’s a little harder to see here but here you I think this is this is after the pop in 2016 after the pop in 2020 so I do want to point out going back to this you know when gold breaks above 2100 and you know the new bullmark it’s really running valuations

Are going to go up a lot and very quickly and you see that in the you see that in all markets that happens in the stock market you’re coming off a major low and you get these huge gains it’s mostly valuation driven because valuations come off out of the toilet

And they go to normal levels and again you saw that here just one example 2016 2020 so I think we I think we’re going to see that whenever gold breaks above 2100 for good and it gets to 22 23 24 you will see that you’ll see huge gains in the stock so

Now’s the Time to find I mean in my opinion find the high quality stuff that’s undervalued it’s cheap and undervalued you know the lower quality stuff I I’m more attracted to that when it looks like gold is really going to break out on that note thank you so much if

You stayed until the end I appreciate it sorry for all the rambling let me know what you think leave a comment talk to you guys again in the next video