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There are many ways to document the under-performance of the gold
and silver mining space. One way is to look at long term charts and measure the run-up or the correction. Another way to measure the under-performance, is in terms of [the price of physical] gold.
By George Kesarios (Read the original unedited version on SeekingAlpha.com HERE.)
Two of the most followed commodity stock indices are the Philadelphia Gold/Silver XAU Index and the AMEX Gold Bugs HUI Index. The difference between the two is that:
- the HUI is a pure gold stock index and
- the XAU has both gold and silver mining companies.
HUI Index to Gold Ratio
The chart below shows the ratio of the HUI index to gold. This is really a very oversold ratio. As you can see, the ratio is approaching the lows of 1999.
(Click to enlarge)
XAU to Gold Ratio
…If you really want an eye-opener, the next chart says it all. The ratio of the XAU to gold is at all time lows going back to 1983.
(Click to enlarge)
Charts from here
It is very difficult to answer the question “Are the stocks that comprise these two indexes — the HUI and XAU – over-sold enough to warrant buying them?” because, as I have said in previous posts (here, here and here), I think gold is going much lower.
Conclusion
…Since the stocks that comprise the two above charts are at all time over-sold relative levels, and they have corrected much more than gold, if you know your gold stocks, “digging” around for opportunities is probably worth your time.
The above post has been edited by Lorimer Wilson, editor of munKNEE.com (Your Key to Making Money!) and the FREE Market Intelligence Report newsletter (see sample here – register here) for the sake of clarity ([ ]) and brevity (…) to provide a fast and easy read.
*http://seekingalpha.com/article/1406401-chart-of-the-day-the-xau-to-gold-ratio
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(Also check out this article just posted on SeekingAlpha.com)
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