Dan,
Sometimes I wonder about Adam Hamilton...
Did he just completely miss the main reason for the HUI's "poor" performance, or did I miss him talking about it?
Imagine that the cost of production for gold is $250 (I'm sure it's different, and varies by company, but this is just an illustration).
Now, imagine that the POG rises from $300 to $400, a 33.3% rise.
The profit of the miners, assuming constant production, goes from $50 to $150, or a 200% rise, and a 6-1 ratio of the Profit vs the POG.
Next, imagine that the POG rises from $400 to $450, a 12.5% rise.
The profit for the miners goes from $150 to $200, or a 33.3% rise, and a 2.7-1 Profit-POG ratio.
Finally, picture the POG going from $950 to $1000, slightly more than a 5% rise. The profits for the miners go from $700 to $750, or a 7.14% rise, and a 1.42-1 Profit-POG ratio.
In other words, as the POG rises, the Profit/POG relative increases will asymptotically approach 1.00.
Granted, in an environment of a rapidly rising POG, sentiment will tend to favor the HUI stocks, but I still wouldn't expect much more than a 2-1 ratio between the HUI increases and the POG increases, and even that should decrease as the POG goes stratospheric.
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