Gold miners are currently being valued for roughly $1175-$1200 gold prices even though spot is currently $1265. This could have to do with the fact that the 'smart money' sees gold dropping below $1200 during the summer OR it could also have to do with the weak seasonal period the sector is now entering.
However, something interesting could also end up happening. Markets can sometimes become too efficient and price in something that doesn't end up happening. If gold doesn't drop fairly soon May could end up being a good month for the gold miners, bucking the seasonal trend, as gold miners offer attractive value relative to the gold price.
Looking at the long term chart of the HUI/Gold ratio we can see the importance of the late-2015/January 2016 lows:
HUI/Gold (Daily - 8 Year) - Potential Head & Shoulders Bottom With Upside Breakout Scenario (Purple)
From my estimation when the next leg higher in gold mining shares begins the upside should be greater than the January-August 2016 rally; a breakout above the August 2016 peak would target a move up to at least the September/October 2012 peak in the HUI/Gold ratio. Whereas, a breakdown below the December 2016 low would jeopardize this head & shoulders bottom interpretation.
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