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).

This classic indicator is flashing the strongest buy signal for gold stocks since early 2009, when they were just starting to recover from the 2008 crash.

Here’s the chart:

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Site Tip: to find the cheapest gold stocks, start with two lists in our Editor’s Picks section (updated daily).

1) Solid Gold Miners: these stocks are producing gold already, earning money (!) and are cheap relative to their cash flows.

2) Value Gold or Silver: this list includes companies exploring or developing properties that are not yet producing. Companies must have 43-101 or JORC compliant resource estimates in the indicated category or better, not have too much debt relative to equity, and be cheap relative to their resources.

Click on any company in a list to see more details and investigate further.

Happy prospecting!

It’s odd: despite gold’s steady rise from 1100 to 1500+ over the last 12 months, many gold producers are actually lower than in Spring 2010, as evidenced in our Gold Producers Index (5-year view here):

Profits are up very nicely in recent years due to leverage on the gold price, but the shares have been a big disappointment, as investors seem to be directing their enthusiasm into the metals themselves. This means that even at historically high stock prices, precious metal miners are trading at normal multiples to assets and earnings.

This makes sense if you believe that we have reached the top of this commodity cycle, because value investors know that you don’t pay premium multiples near the top (though you do near the bottom, when earnings are likely to grow). On the other hand, if you believe this bull still has legs, now is probably not a bad time to add to positions, as there seems to be a fair amount of apathy towards PM producers at the moment, so an uptick in sentiment could bring nice results.

Note that the above does not apply to gold explorers, which have done quite nicely since early 2010, though they only have been digesting that move so far in 2011.

Phew! We’ve been working ’round the clock to get this website out of beta, and have just today assembled version 1.0 of the full site. You can finally play with our maps and fascinating niche mining indices, and explore our lists of stocks grouped by mineral and category. See the Picks tab for pre-filtered stocks that pass a battery of financial strength and value tests. We’re also running a “map of the month” on the front page, and of course every company’s properties are mapped on their respective pages.

Plus, we just topped 1700 stocks, which pretty much exhausts the US, Canadian, UK and Australian listings.

Enjoy!

Lots going on these days as the new version of this site is about to go live in 1 week! Some of the new features:

• Google maps of every property (over 9000 now!)

• 17 special mining indices & charts

• Dozens of lists of companies by mineral and other categories

• Editor’s Picks of value stocks in various categories (best exploration, best gold producers, best base metals, etc)

• Improved value ratios & graphics

• Sponsor profiles

• A whole new, easy-to-use layout for the entire site

We’re looking forward to seeing lots of you in person at PDAC, on the expo floor or better yet over cocktails!