By Sumit Roy
The gold/GDX ratio suggests miners may have fallen too much relative to gold.
The ratio of the price of gold to the price of the Market Vectors Gold Miners ETF (NYSEARCA:GDX) peaked at a record above 55 in June, before quickly falling to last trade near 46. As a group, gold miners have consistently underperformed the yellow metal since about 2007.
Lower gold prices may force mining companies to cut costs and streamline their operations, leading to better results. A reversion to a gold/GDX ratio of 23 -- seen as recently as 2011 -- could lead to a doubling in the ETF, just based on current gold prices.