As I wrote 3 days ago, Gold miners have been punished really hard. Maybe a bit too hard.
Therefore I went on a gold mining shopping spree today when the markets opened.

It’s always hard to spot an exact bottom, but in hindsight, this is as close as one can get:

Over the last few months, some of my readers have asked me the following questions:

“Won’t Gold stocks crash if/when the Dow Jones/SP500 tank?” And “If Gold drops more, won’t the Gold stocks drop to new lows?”

Well, that would seem to be the most logical answer, yes. But, sometimes, the markets can do weird things. In my opinion, Gold Stocks have been punished so badly, that even if Gold would remain flat (or even go down), it would still be possible for Gold stocks to ignore the metal price, and actually rise instead.

This is exactly what happened in 2000-2001. Have a look at the following chart:

What do we see?

The HUI index bottomed in November 2000 at 35.31
Gold bottomed in February/April 2001 at $256.
The SP500 index dropped sharply going into September 2001.

What’s so spectacular here?

The HUI index bottomed 3 to 5 months prior to Gold (shown by the Red and Blue lines in the chart below). In fact, at the time Gold bottomed, the HUI index was actually trading around 47, up about 33% from its lows!

Moreover, when the markes crashed on 9/11, the HUI index was trading at 75, up a staggering 112% from its lows!

So I don’t (just) look at the metal price or the general markets when I decide to buy (gold) stocks. They can go up or down, and I don’t know what the future brings. What I do know, is that Gold Stocks have never been cheaper compared to Gold than they were in early August, when I decided to buy.

Even after the recent upturn, they are still nearly as cheap as they have ever been.

Willem Weytjens

www.profitimes.com

© 2015 Copyright Willem Weytjens - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.