According to Sector Investment Managers' chief executive Angelos Damaskos, the present valuations of gold-related equities would make them fairly valued if gold were $1,100. Since gold is above $1,400, and Damaskos expects the metal to go to $1,500, he's clearly implying that those equities are undervalued right now.
He's not alone in that claim. Senior golds are selling at around 10 times forward earnings, which is well below the median P/E. An earlier article in the Wall Street Journal opined that these shares are being punished, like major integrated oil companies, for having low (revenue) growth potential. Any growth in earnings would largely come from expanded margins.
Still, they stick out for being out of favour. For how long is anybody's guess, but if gold becomes temporarily mainstreamed they would be the most plausible investments for those who don't want to hold bullion. Perhaps the shares are being held down because only bullion is recommended as asset protection, and gold ETFs compete for investment dollars with their common stock. Mainstream equity analysts and other big players haven't really gotten behind them yet. The fourteen companies composing the Amex Gold BUGS Index of major unhedged producers is here; the performance of the index is tracked here. An ETF that tracks the related Amex Gold Miners Index is the Market Vectors-Gold Miners ETF [NYSE: GDX].