The recent strength in gold mining shares is reversing a huge trend that's been in place since early 2009: "base-metal miners up, gold miners not so much."
For much of the past year, the mining firms that focus on copper, zinc, and nickel have far outperformed the mining firms focused on gold. Major copper miner Freeport-McMoRan, for instance, has gained as much as 180% since the March 2009 panic. Major gold miners Barrick and Newmont have gained less than 50% in the same time period. You can see the trend in today's chart, which tracks the ratio of Freeport shares vs. Newmont shares.
The rising trendline from early 2009 to early 2010 shows how the market favored Freeport over Newmont. This outperformance came from the "reflation trade"… Investors bet the government's giant E-Z-Credit program would stoke demand for all kinds of building materials, like copper.
Now have a look at the right side of the chart. You'll see folks are souring on the reflation trade… and they're starting to favor Newmont over Freeport. If you're of the mind that the global recovery is fake… and that debt problems will continue to send gold prices higher… you'll want to bet on this new "gold up, copper down" trend continuing.
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