We have been quoted here on many occasions saying that when the general equity market takes a dive of –10% or more, so too does gold stocks by a greater margin. Our point, gold stocks are not a hedge from general market drops.
In our September 24, 2014 article titled “Gold Stocks: Risks and Remedies” we highlighted the numerous instances from 1939 to 2011 of when the Dow declined by more than -10% and showed how either the Barron’s Gold Mining Index or the Philadelphia Gold & Silver Stock Index declined by a greater percentage.
In the recent decline of the DJIA from January 26, 2018 to February 8, 2018, the index declined –10.36%. So how much did the Philadelphia Gold & Silver Stock Index (XAU) decline? The XAU declined –11.57%.
In the chart above, we have excluded the decline of –14.75% from January 24, 2018 to February 9, 2018 in the XAU index. Add this to the growing list of instances of when the DJIA declines more than –10% and gold stocks also decline by a greater percentage.