Wednesday, September 7, 2011

Precious Metal Stocks vs Other Equities

Gold stocks continued to trade higher overnight, putting on modest gains after a volatile night. The HUI and GDX both finished around .6% higher, both having traded well higher earlier in the night while Gold fights to take and maintain the US$1900 level.

I would like to share a couple of charts which show how Gold stocks have recently diverged from the rest of the market, performing strongly while the rest of the market falls.

The first is courtesy of Acting Man:
A 'heat map' of Friday's action in the S&P 500 shows that only the lone gold stock in the index managed a respectable increase during Friday's equal opportunity massacre.
CLICK CHART TO ENLARGE

The second chart shows a comparison in percentage terms of S&P500 vs HUI performance. It speaks volumes and shows an obvious disconnect as the Gold stocks start to break away from the rest of the market.

CLICK CHART TO ENLARGE

It really does beg the question, why have your money anywhere else?

Every investor should have a strategy based on their personal circumstances, so I can't very well suggest it would be suitable for everyone to go 100% long Gold, Silver and precious metal stocks, but I personally don't see much of an opportunity short term outside of this sector and struggle to understand how anyone would feel comfortable outside of precious metal related or fixed income investment strategies.


BB.


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