A Good Time to Dig Into Gold Miners?

In a phone interview with ThinkAdvisor, Gambarini cited several trends supporting her call.

First, shares of gold miners are undervalued relative to book value. The stocks are trending below the value of the miners' assets — i.e., their estimated reserves — while they normally trade at a premium.

Part of the challenge in valuing these reserves has been gold's price volatility, she explains. Gold prices rose for much of the past decade, but the recent price pullback means miners must adjust their price forecasts and reserve valuations downward to reflect current and anticipated market conditions.

Stable gold prices help miners, says Gambarini, by allowing them to focus more closely on their operations and avoid additional reserve write-downs.

Another supporting factor: Miners have substantially improved their business strategies and cost containment efforts. These changes are not (yet) reflected in the stocks' prices, Gambarini maintains.

Additionally, as the global economic recovery continues to pick up, equities should benefit, including mining stocks, she says. (The last time gold traded around $1,250 an ounce, gold miners' shares were trading about 111% above current levels.)

If the miners look attractive, isn't it also a good time to invest in gold as a metal? Not necessarily, the expert argues.

Gambarini points out that the metal and its miners differ in how they are affected by different economic and market scenarios.

"Historically, gold miners have tended to outperform the gold price when global business activity, as measured by the OECD World Lead Indicator, has been high and rising," she explained in the report. "Conversely, the gold price has tended to outperform gold miners when growth has been slowing and the global economy has been in a downturn, as in the aftermath of Lehman Brothers' collapse."