via BCA Research - Gold Mining Share vs. GLD ETF

One thing that has been entirely missed by research involving comparisons with GLD and mining shares is that other ETFs provide a much better hedge against gold mining risk in historically low yield interest rate regimes.

The TLT would be a much better hedging strategy than GLD, and will continue to provide returns especially in major downturns. (that might change should gold mining companies pay dividends or demonstrate investment value)

Through an equity swap derivative, it's perfectly legal to sell gold mining shares you do not own and employ that money in TLT units or futures options. The result has been that the publicly held float of many gold mining companies are almost entirely shorted, showing negative numbers in undeclared short positions, or a negative carry.

And it can be shown in particular cases such as GBN.V that prices were truncated after the initial rally against gold in 2002, and then remaining rangebound, forming a bearish broadening pattern over the long term.

Contrast this with persistent advances in TLT, despite declines in the U.S. dollar vis a vis $CDN, and aggressively advancing gold prices far above costs.

http://blog.bcaresearch.com/gold-shares-versus-gold-prices

-F6