Since it seems to be the time to start writing more about the miners after years on the out cycle, with only the eternally bullish pompom squad micro managing the sector…

From Mining Weekly:

SocGen says miners’ output costs have dropped more than expected

Miners’ output costs have dropped more than industry consensus due to lower energy prices and weak emerging market currencies, a report by Societe Generale showed, suggesting metals prices have further to fall before miners are forced out of business.

“At the beginning of last year, the view was that metals like aluminium and zinc were well supported by their cost curves, while copper was way above its cost floor – and still is. But people are now realizing that cost floors are much lower due to falling oil and commodity currencies,” Mark Keenan of Societe Generale in Singapore told Reuters.“The likelihood that mine supply will also be cut as a result of weak pricing has also fallen – therefore prices are vulnerable,” he said.

The article discusses metals miners, not gold miners.  I agree with the analysis in that positively correlated metals like copper are subject to supply fundamentals and the demand of the global economy.  I am on board here and indeed, they seem to be telling us why the copper chart has been forecasting $1.50 a pound for so long now.

But the SoGen analysis also contains the reason that the gold mining sector would be unique among metals producers.  If – and we are still only in the land of ‘if’ right now – the macro changes and new trends are established, the counter cyclical sector would benefit from dropping oil and reduced costs.

Gold-Oil

Copper-Oil

Though gold is rising slowly vs. copper, there is still no change on the macro backdrop and that is why we are not actionable yet.  But if things were to go counter-cyclical, copper has further to fall than gold.

While Au-Cu is fairly constructive, Au-SPX is still a mess.

Although our oft-shown cyclical ratio, Pd-Au is very bearish.

What does it all mean?  I’d guess it means have patience but be paying attention.  If that Au-SPX chart starts to wake up and certain things happen in T bonds changes will be here.  Until then, all we are doing is coming out of hibernation and getting interested in the gold stock sector.