Gold’s correlation with other commodities and even the stock market comes and goes. At times, it moves almost tick-for-tick with oil and base metals, at other times it has a strong negative correlation, and sometimes there is no discernable correlation at all. The last few trading days have produced a negative correlation with the “risk trade” (energy, base metals, stocks), and a positive correlation with the Swiss Franc, currently the world’s preferred safe-haven currency.

Gold stocks, however, have reverted to their unfortunate habit of falling whenever the broader equity markets experience a touch of panic. While it can be bewildering to watch gold move one way and gold miners another, value investors must be lining up with buckets the lower the XAU:Gold ratio falls (see chart below). This classic metric of the price of gold miners is nearing the all-time lows set in 2008. The lower it goes, the higher the potential earnings yield for owners of the shares.

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The place to look to take immediate advantage of this situation would be currently producing gold miners. In fact, our Gold Producers Index was the best of a bad lot on Friday, with a decline of just 1.7%, compared to 5.3% for Gold Explorers (and some much larger declines for industrial mineral companies).

Gold stocks don’t traditionally come to mind when you think of value investing, but if things continue in this fashion, we could find some great assets and solid cash flows for a bargain.

Protip: keep an eye on the Solid Gold Miners and Value Gold and Silver lists. These are updated each night using an automatic screen for certain value criteria (balance sheet tests, stock price relative to resources, etc).