A gain of almost 300%, sweet

Gold and HUI, daily, May 4th to July 4th, 2012

On May 4th I wrote about the opportunities gold mining stocks presents. I suggested folks take advantage of the opportunity presented by a divergence between HUI (sometimes called the “gold bugs index”) and spot gold prices. So lets look at the record; the chart above shows the daily price of spot gold ($GOLD, black line) compared to the daily price of HUI (red line). Since gold hit a 2012 low of $1533 on May 15th, the price of the metal has moved steadily upward, gaing 4.66% but during the same period of time the HUI rose 17.82%. In other words gold mining stocks – HUI – has beaten gold by almost 300%.

With news that the American economy is slowing, China is slowing, commodity prices are collapsing the UK is double dipping and Europe is tottering it would seem that globally central banks are going to print some (more) money.

While more money in the global financial system most definitely would be a positive for gold (and perhaps silver), there are also opportunities – perhaps better – in the shares of companies that actually mine the metals or, as I’ve mentioned before, HUI. And even though we’ve seen a sharp rise I don’t think the upside to gold is for 2012 and neither does Forbes. Always an entertaining and informative read, The Daily Reckoning outlines a way gold could hit $10,000 a ounce.

$10,000 an ounce gold? Yeh, that would be sweet.

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