Gold Miners Positioned For Upswing: Keep An Eye On This Leading Economic Indicator

A fundamental gauge in the world of finance and economics has just provided a signal not to be underestimated. We are talking about the gold-to-copper ratio, which can offer valuable insights into the overall health of the global economy and financial markets.

This ratio represents the strength of a safe-haven asset, such as gold, which tends to rise during periods of market and economic turmoil, in comparison to copper, often considered a barometer for industrial production and seen as the driving force behind global economic growth.

In practice, it indicates how many pounds of copper one ounce of gold can purchase.

As highlighted by SentimenTrader on social media platform X, the “copper-to-gold ratio has recently crossed a crucial threshold, signaling positive prospects for metals and mining.”

When examining the chart, this indicator surpassed the value of 544 on Wednesday, reaching its highest level since the end of May 2023.

The ratio is now approaching a significant resistance zone, marked by a triple-top pattern that occurred in December 2020, July 2022, and May 2023.

Why Is Gold Rising?

The conflict in the Middle East has so far benefited two commodities: gold and oil. While the increase in oil prices is primarily due to rising geopolitical and supply risks in the region, what has garnered more attention in recent weeks is the surge in gold prices.

This is because not only has the price of gold risen by 6% since Hamas carried out terrorist attacks on Oct. 7, but it has also done so while Treasury yields and the dollar were on the rise, breaking its usual negative correlation with these variables.

According to Otavio Costa, a partner and macro strategist at Crescat Capital, gold appears to be on a path toward reaching $2,000 per ounce again, indicating the potential for a significant breakout that could mark the beginning of another long-term cycle. Costa referenced a statement made by Ray Dalio: “If you don’t own gold, you know neither history nor economics.”

Gold Miners Outperformed

Gold miners have emerged as the top-performing industry in October.

Both the VanEck Gold Miners ETF GDX and the VanEck Junior Gold Miners ETF GDXJ have seen impressive gains of 9.5% and 7.5%, respectively.

These returns outshine those of any other U.S. industry, including Oil & Gas Exploration & Production, as indicated by the SPDR Oil & Gas Exploration & Production ETF XOP, which has posted a 3.3% increase.

Gold Fields Limited GFI has emerged as the best-performing stock in the GDX thus far in October, up 31%.

Harmony Gold Mining Company Ltd HMY has been the top performer among junior gold miners, up 29% this month.