Gold Stocks, the Gold Price and Market Timing
This 2011 paper looks at gold equities, and the issue of whether information in gold prices and indices can be used to predict future returns. The abstract states
We investigate the relationship between gold prices and gold equity index levels and consider whether this offers any explanatory power for the future returns of gold stocks. It is observed that a simple, well-specified model can explain movements in the stock prices of gold-producing firms. Using evidence from gold exchange-traded funds, we also show that investors market timing decisions have reduced their average returns from these instruments by over 1.5 per cent annually between 2005 and 2009.
The paper looks at the sensitivity of gold mining and producing equities to the gold price and notes taht over the period of analysis it has declined quite markedly. They suggest that although the outlook, in a world of low or even negative interest rates, is positive for gold average investors might best be advised to stick to passive investing.
A full citation is Gwilym, O. A., Clare, A., Seaton, J., & Thomas, S. (2011). Gold stocks, the gold price and market timing. Journal of Derivatives and Hedge Funds, 17(3), 266-278. A downloadable working paper version is available