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Some of these underperforming large-cap stocks are AngloGold (NYSE: AU) (-8.9%), Kinross (NYSE: KGC) (-8.4%) and Barrick (ABX) (-4.7%). The reason for this is that though the sector’s prices and gold prices are correlated over the long haul, in the short term and often in the intermediate term, a sector index like Thomson Reuters, which is heavily weighted toward large-caps and does not have any micro-caps, will de-couple at times from the metal price.

With gold having prices have increased during the year, it may be surprising to some that the sector has not done as well.

But it bears knowing that other technical indicators (not shown above) give some support to the conclusion that sector prices may head back up soon as the sector’s prices are approaching an oversold condition. The reason for this breakdown is most certainly the recent decline in gold prices over the past month.

With gold expected to continue its upward (bumpy) trend, what about gold mining stocks? How have they done versus the rise in gold prices and what may happen to them in the future? Using the Thomson Reuters Gold Mining Sector as our base and some basic technical analysis, Figure 2 shows an interesting sideways pattern for gold miners.įor most of 2011, the gold sector has been moving sideways though in late September sector prices have broken through both the 200-day moving average as well as the Bollinger Bands (a significant indicator of price volatility) that have held steady since late 2010.