Scaling into Gold Miners vs. Gold Futures - A Costly Lesson in Correlation

Ran into an issue a few years back trying to scale into what I thought was a deep value play in gold miners, specifically some mid-cap producers. My thesis was that they were oversold relative to physical gold, and I wanted to layer in slowly. The mistake was trying to hedge the equity exposure with short $GC futures. In theory, it made sense: short the commodity, buy the producers.

What I failed to fully account for, or perhaps underestimated the degree of, was the variable beta of these miners to gold itself, especially during periods of stress. When gold dipped, the miners plummeted far harder, and my short futures position, while profitable, didn't nearly offset the equity drawdowns. Essentially, I was hedging a relatively stable asset with a leveraged, more volatile proxy of that asset, leading to a much wider P&L swing than anticipated. Should have just bought call options on the miners or stuck with a simpler long-only gold position.