However, in recent times, the total mix has been shifting towards bullion not held in central banks as well as ETFs such as GLD. Given this shift, gold mining companies receive quite a bit of attention as well.
It has been variously estimated that mining provides 90% of the world’s supply; the rest is made up for with recycling. However, mining and mine production does not respond quickly to prices. It often takes decades to move from discovery to production. Exploration – wherein gold is found – can take up to 10 years and development – wherein the location of estimated deposits are dug into and made ready for production – can take up to 5 years while mine operations can last as long as 30 years. All of these activities are subject to the price trajectories of gold; if gold is deemed too cheap, a location may be deemed uneconomical to mine.
This intuitively implies that the price performance of gold mining stocks aren’t necessarily in trend with the price of gold.
Instrument Trends in 2022
From the start of the year till the end of November, while the three instruments show pretty strong correlation, it isn’t perfect.