Singapore (13 July 2020) — While the Nasdaq recently powered back up to record highs making the headlines, there is another lesser known sector which has been quietly outperforming the Nasdaq not only this year but for almost 2 years: the gold mining sector.
Shares of gold mining companies have been off investors’ radar for many years due to the dismal price of gold. However, when gold prices started to rise from its low of USD 1,186 in October 2018, it was not long before the share prices of gold mining companies followed suit.
The precious metal traded above USD 1,800 per troy ounce last Wednesday (8th July 2020) for the first time since 2011.
Table 1 compares the performances of gold mining shares (as represented by the NYSE Arca Gold BUGS Index or better known as HUI), physical gold and selected stock markets over different periods.
Table 1: Performance Comparison
| Index | Asset Class | Year-to-date (13/7/20) | Since November 1, 2018 |
| Gold Physical | Precious metals | +19% | +52% |
| NYSE Arca Gold BUGS Index | Index of US gold mining equities | +29% | +108% |
| Nasdaq | US Equities | +18% | +45% |
| Straits Times Index (STI) | Singapore Equities | -18% | -12% |
| Newmont Goldcorp | US Equities | +41% | +101% |
| Apple Inc | US Equities | +32% | +81% |
Source: Yahoo Finance
As we can see from the performance table, both gold and gold mining companies have done well and in fact, outperformed their more illustrious peer, NASDAQ. In fact, even at the company level, when we compare the market’s darling, Apple Inc, with the largest company in the gold mining sector, Newmont Goldcorp, the latter has outperformed over the time frames we are referring to (see Chart 1).
Notably, the bigger picture tells us that the gold mining sector remains vastly undervalued relative to other asset classes, which have risen so much more since the 2008 crisis. The chart below shows the comparative performance of the HUI and NASDAQ since 2008 and how the former has vastly underperformed relative to the latter. But with a host of macro and micro factors now aligned in favour of gold and gold mining shares (which we will discuss in future articles), the gold mining sector is certainly poised to take the spotlight away from these other asset classes in the coming few years.
Chart 2: Gold mining sector has severely underperformed other asset classes since the crisis….this is about to change
Disclaimer: Mr Sani Hamid is a Director (Economy & Market Strategy) with financial advisory firm Financial Alliance and a Certified Financial Planner. He contributes to www.halaluniverse.net on a regular basis. The views, opinions and information expressed in this article are purely Mr Sani’s and don’t necessarily represent the views of Halal Universe. Mr Sani’s views in this article are not meant to be construed as financial advice. Investors should seek advice from a financial adviser before investing.
