Watch gold mining scrips to predict gold price trend: CLSA

It served as lead indicator for last year's decline, says Chris Wood

If you want to know where gold prices are headed, it might make sense to keep an eye on the shares of gold mining companies.
 
They have served as a leading indicator in the recent past and might suggest some upside, according to CLSA’s Chief Equity Strategist Christopher Wood.

“...the action in the gold mining stocks is serving as a useful lead indicator for the price of bullion, with Newcrest Mining, for example, up 30 per cent year to date.The gold mining stocks were certainly a lead indicator for the decline in the gold price last year,” he said in his periodic ‘Greed and Fear’ report, dated February 6.
 
Those who had taken a contrarian call on gold would have been well rewarded, it added.

“What is clear is that anyone who wanted to construct a truly “contrarian” portfolio, positioned the opposite to the consensus at the start of 2014, would have included a large weighting in gold mining shares, as well as a large weighting in the 30-year Treasury bond. So far, at least such a strategy would have worked with the gold mining index up 7.9 per cent in US dollar terms and the US 30-year Treasury bond price up 5.9 per cent so far in 2014,” he said in the report.