Here’s a chart of the popular mining ETF, GDX, relative to the spot gold price:

Source: stockcharts.com

A long-term chart of XAU index to gold shows the lowest value in 20 years except for the panic low in 2008:

Source: stockcharts.com via http://oilandgas-investments.com

Since last summer, this ratio has been bouncing around in a range not seen since the depths of the last bear market in late 2008 to early 2009.

Our own gold producer index is still slightly lower than before that crash, when gold topped out at $1000.

As a result of high metal prices and strong cash flows, we are now showing 66 miners that are actually paying dividends, a rarity in this industry:

http://miningalmanac.com/stock-lists/dividend-mining-companies

It is very unusual for gold to trade higher than platinum, so when an inversion happens it can be an opportunity to put on gold shorts and platinum longs. In the “risk-off” trade of recent months, industrial metal platinum has lagged safe haven gold. At the last market bottom in early October, the ratio reached 1.125, when platinum was trading in the $1450 range and gold held around $1600. As stocks and risk assets have rallied since then, the ratio has come off a bit, but still remains high at 1.08 (Tues close):

Just a quick post on this sunny Friday afternoon in August…

Check out this divergence over the last three months between our gold producers index and platinum group index, as the gold price has risen to meet platinum. If this spread returns to more normal levels through a rise in platinum, we could see that index catch up.

Tip: compare any group of our mining stock indices here.

Over the last 40 years, the ratio of the price of an ounce of gold to an ounce of platinum has risen from its typical range of 0.5 – 0.95 to exceed 1.0 a total of 11 times. Two of those times it spiked to over 1.2, and once to 1.4. The other 8 times, it receded within a few months.

Last week the ratio hit 1.0 for the first time since late 2008, then backed off a tad, and in today’s risk-off trade platinum is down and gold is up so that the ratio is again 1.0.  It makes sense for gold to be stronger than platinum when the markets are puking risk, since gold is more monetary and platinum is more industrial, but history says that the ratio will recede sooner or later.

Sentiment also suggests that gold is due for a pullback of some kind, since traders have been overwhelmingly bullish on the metal for the last month. Traders are of a more neutral opinion when it comes to platinum, so from a sentiment point of view you can make the case that gold needs to cool off in relation to platinum.

Here is a three-year chart of the daily closing ratio:

Source: stockcharts.com

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Here’s a long-term chart that is not up-to-date:

Source: Market Oracle