Why are gold stocks falling while gold is rising?

A large number of my readers ask why many gold stocks weakened in the last week on days when gold made new (nominal) record highs. Not only is it disappointing; it seems like something is wrong. I understand these concerns. As gold moved towards $ 2,000 an ounce, gold stocks presented their long-term leverage to the gold price. Gold is up 1% and gold stocks are up 3%, 4% or 5%. This pattern lasted for decades, and not just for gold; it applies generally to commodity stocks. That is partly why we buy these, and not just raw materials per se. So what’s the problem – are gold and silver stocks broken? No. The leverage that stocks provide on their underlying commodities is a pattern, not a law. A few opposing days or weeks does not mean that the basic relationship has changed

Taking a look at other gold stocks
The HUI Gold Bugs Index is up 45.5%, with the GDX and GDXJ ETFs up by similar amounts. This is not as far above gold as you would normally expect, but still positive leverage. But why is the leverage lower than normal? It would take some research to say for sure, but stocks were hit harder than gold by the March meltdown. They start from a lower base than the numbers from the beginning of the year suggest. Gold is up about 38% from its March lows – but the HUI has risen 113% since then. The GDX by 125.4% and the GDXJ by 174.6%. Here is our lever. Plus, producers (as in the HUI, GDX and GDXJ) have been under the shadow of COVID-19 quarantine regulations. If gold doesn’t reverse over a long period of time, the earnings will add further upside leverage.