How do you determine the best time to buy gold/silver mining stocks relative to the price of gold?

The best way to measure how undervalued/overvalued gold and silver mining stocks are vs. the latest price of gold is by taking the current value of the HUI Gold Miners Index and dividing it by the latest price of gold per ounce – thereby creating what is most often called the ‘HUI/Gold Ratio’. Over the last 20 years, the median daily HUI/Gold Ratio has been 0.3615.

Currently, with the HUI Gold Miners Index at 135.95 and gold trading for $1,163.30 per oz – we have a HUI/Gold Ratio of only 0.1169, which puts it in the extreme buying opportunity zone.

he HUI/Gold Ratio was last in the extreme buying opportunity zone in late-2000 and it afterwards needed a total of only 18 months to rise back up to its 20-year median of 0.3615.

From its current level of 0.1169, the HUI/Gold Ratio needs to more than triple in value just to return to its historical median of 0.3615! This means if gold prices trade sideways/flat for the rest of 2015 and throughout 2016, gold miners on average are likely to more than triple in value.

If gold rises in 2016 to a new all-time high of $2,000 per ounce, while the HUI/Gold Ratio simultaneously returns to its long-term median of 0.3615, we will see the average gold miner rise next year by 431.81%.

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