"When earnings are reported, the market will be all goggle-eyed about how much cash is flowing in to these companies and what their balance sheets look like," said Bergtheil. You tend to get a response at that time.''
Debt Crisis
Gold equities have been dragged down as investors seek a haven from market turmoil stoked by the sovereign debt crisis. The MSCI All-Country World Index has fallen 12 percent this year while the Stoxx Europe 600 Index has sunk 16 percent.
Barrick Gold, the world's biggest producer, has slipped 6.1 percent in 2011, even after posting record earnings in the third quarter. AngloGold Ashanti, Africa's biggest supplier, has slipped 10 percent, while Newmont Mining has advanced 6.3 percent. Randgold Resources Ltd. and Yamana Gold Inc. are the only members of the Gold BUGS Index to have outperformed the metal this year, up 27 percent and 22 percent, respectively.
The Gold BUGS index today rose as much as 4.7 percent, the most in eight weeks.
Investors have been increasing holdings in exchange-traded products physically backed by gold to bet on gains in prices for the precious metal, without accepting the potential negatives that come with holding company shares.
Record Gold Hoard
"Investors are voting with their feet," said Ian Preston, a resources analyst with Goldman Sachs Australia Pty in Melbourne. "They can get all of the leverage they want out of going straight into an ETF without any of the operational risk, or political risks, or general risks associated with equities."
Holdings in gold ETFs on Nov. 23 reached a record 2,350.8 metric tons, valued at $127.6 billion, according to data compiled by Bloomberg. Hedge funds and other speculators increased their net-long position, or bets on higher prices, for four weeks, the longest stretch since March, Commodity Futures Trading Commission data show.
"Gold equities will come back," Norm Pitcher, chief operating officer of Vancouver-based Eldorado Gold Corp., said in an interview yesterday. "The one thing you don't have when you are buying an ETF is any upside to exploration, and I think the companies that have good exploration assets are the ones that will probably be valued a little higher."
That attraction of ETFs over stocks may also fade when concerns ease that the European debt crisis will ravage corporate profits, said New City's Wong.
"Gold mining shares are still equities, so they are determined by the equity market as a whole, not just gold," said Wong. "The performance of equities in a bear market is bad. Once there is some stability and people are prepared to take risks, I see that there will be a massive move."