The recent military conflict with Iran was enough to briefly push the price of gold above the $1600 level. The move was short and it only stayed above that mark for about 90 minutes before retreating back to the $1560 area where it is now.
The move back down as tensions settled created a bit of a disconnect between the price of gold and the value of gold miner stocks. The two moved down in unison before gold miners dipped further creating a discount of about 1% relative to the value of gold.
The question for traders now become is gold overvalued relative to miners or are miners undervalued relative to gold?
The answer lies in the conditions that created the disconnect in the first place. Gold spiked nearly $50 an ounce over the course of about 24 hours when it started looking like a deeper conflict might be in store.
But precious metals prices tend to be volatile when the cause is an event like military conflict. Gold miners often don't trade in lock step with gold itself in those scenarios. It's during times when the underlying economic fundamentals tell a certain story that the two tend to move in tandem.
As to which is over/undervalued in the current scenario, it appears gold is still a bit overvalued here. The disconnect between the two isn't large, so I don't think there's much of a real profit opportunity.
But it's worth noting that the dollar has begun trending lower again, thanks to a slightly weaker than expected jobs report.
This isn't a significant move in the dollar by any stretch, but it's the kind of economic-not-political move that can lift both gold and gold miners back up again.
For 2020, I think gold miners remain a more attractive pick than gold, while retaining my view that gold enters the $1700 to $1800 an ounce range later this year.
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