As Pierre Lassonde recently explained to Mineweb, "Most analysts are using their economist's projections for gold and for the last 10 years it's always been way under the reality. For example today the average is probably looking out five to 10 years as they're using $1,100 gold vis a vis a real gold price of $1,600 so what do you expect... they put out recommendations using $1,100 gold, so therefore the price that most of the stocks are trading at on a net asset value is around $1,100 to $1,200 gold and that is not going to change until, either the street uses todays' gold price, or even the contango."

Another reason for the disconnect was explained to Mineweb by Blackrock Gold and General Fund manager, Evy Hambro.

"Gold equity management teams have been very reluctant to share the higher gold prices with investors with regards to dividends and so on and the uncertainty that exists around that is again another reason for gold equity investors holding back their appetite for gold shares."

This is borne out by the rolling 12 month dividend yields offered by the stocks. Of the top 8 tier one gold stocks, only two, Gold Fields(1.25%) and Newmont (1.21%) have yields above 1%.

Eoin Treacy's view Gold mining shares collapsed during the 1990s as gold prices deteriorated. Concurrently, investor interest declined into obscurity relative to high growth technology shares. That all changed as the Nasdaq bubble bust, gold prices bottomed and as investors began to gravitate towards gold. Following the 2008 credit crisis, gold shares were among the very first to rally, break out of their bases and retest their highs. They have been largely rangebound since 2009 and are only now beginning to hit new highs.

This ratio of the gold price divided by the NYSE Arca Gold Bugs Index illustrates the underperformance of gold shares until 2001 and outperformance until 2003. Gold shares again fell faster than gold in 2008 and mostly performed in line with the gold price until earlier this year. Gold has been hitting new highs this year while the majority of gold shares have lagged.

The ratio of US Gold prices compared to US listed gold shares is mimicked in these ratios of Gold in South African Rand divided by South African gold shares and Gold in Canadian Dollars divided by Canadian gold shares. While the ratios are similar, the performance of the individual constituents varies, particularly for the South African instruments.

Gold in South African Rand broke out of its base in 2005 and has sustained a progression of higher major reaction lows since. The pace of the advance picked up markedly from July; accelerating from ZAR10,000 to more than ZAR14,000 today. The FTSE/JSE Gold Mining Index has been ranging mostly below 3000 since 2002 and broke back above that level in late October. A sustained move below 2700 would now be required to question medium-term scope for additional upside in local currency terms.

Interestingly, the Johannesburg All Share is among the best performing indices, globally, following the July pullback. It has rallied to retest the February peak and a sustained move below the 200-day MA, currently near 31,000 would be required to question medium-term scope for additional upside.