For years, physical gold and gold miners traded in tandem. You’d expect the companies that make a living mining gold would move along with the price of the metal. And that’s what happened for a long time… until the market tanked in 2008.

Since then, gold and gold miners have had a strange relationship.

Investors love gold right now. They see a safe-haven; a tangible commodity you can hold, covet, even hoard. But people were scared away from equities during the crash, sending shares of gold miners down much further than gold prices. And while many miners have rebounded nicely (even outperforming physical gold recently), it looks like investors have yet to completely warm back up to the companies that actually pull gold out of the ground.

It’s one of the reasons you can actually buy the gold reserves held by miners for pennies on the dollar. [See: “How to Buy Gold for Only $159 an Ounce”]

The chart below shows the performance of the SPDR Gold Shares ETF (NYSE: GLD) compared to the Market Vectors Gold Miners ETF (NYSE: GDX). GLD holds more than 1,200 tons of gold on behalf of its investors, while GDX’s portfolio consists of stocks from 30 top gold miners.
 

You can see the gold miners are at least moving in tandem with gold prices again. But the message is clear: Until the spread formed between gold and gold miners is closed up, miners remain the cheaper way to invest in the metal.

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