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).

The entire minerals sector has performed very well in July, with precious metals stocks finally catching a bid, but industrial materials stocks have been the best performers of the year.

Here’s a chart of some of the strongest indices since the 2008 crash (pink: rare earths; purple: heavy minerals; blue: base metal producers; green: coal):

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Site tip: To compare indices in a single chart like this, go to http://miningalmanac.com/indices and select “compare” or just go to http://miningalmanac.com/indices/compare.

You can also compare any individual stock to the indices (or the gold price) by going to its pages and clicking on the “charts” tab:

Gold has marched steadily upwards for the last 12 months, but mining stock investors have had a more interesting ride, thrilling at first, but lately frustrating. Juniors all did spectacularly well during the summer and fall of 2010, but this year the stocks have consolidated their gains or drifted lower as gold has continued higher.

However, as gold approached the 1600 mark, miners and juniors alike have finally gotten a lift. Here is a chart of the gold price (blue), gold explorers (pink) and gold producers (green) for 2011:

It is too early to call a breakout of the downward trend, but I’ll be watching for one in the coming days. It is encouraging that the miners have continued this three week uptrend over the last few trading sessions as the broader equity indices have softened. Perhaps we are setting up for another great run once the summer doldrums are over.

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Site tip: You can compare any company to any of our indices or the gold price on the company’s charts page. Try it out with Newmont. Just select the indices you want to add to the chart from the list on the right.