Still an opp in gold stocks?

Spot Gold and HUI, daily, January 1st 2012 to August 15th, 2012

On May 4th I posted about the divergence between the spot price of gold and the producers of gold, i.e., gold miners. I look at correlations a great deal (subject of my PhD thesis actually) and noticing a breakdown in the long run relationship I suggested there was an opportunity in gold stocks by purchasing what is known as the NYSE Arca Gold Bugs Index , aka the “gold bugs index” ($HUI). Since May 16th spot gold is up 3.90% while $HUI has increased 12.91% but is that it?

Well, the media is all abuzz about Soros’ and Paulson’s recent regulatory filings (presented off sec.gov for your reading pleasure here and here respectively), with some media commentary on Soros’ portfolio here and Paulson holdings here. So how about? The chart above shows the year to date performance of both spot gold ($GOLD, black line) and the goldbugs index ($HUI, red line); while gold is up 2.55% over the term $HUI has returned -14.92%, so I still believe $HUI has upside. For context, the chart below presents both $GOLD (returned -10.33%) and $HUI (returned -25.95%) over the past one year, with the sharp price declines that has attracted so much attention from some of the big funds.

But you’ve got to be careful reading too much into what the big funds are up to: but Soros is long Facebook which got folks talking. Still, its only 0.25% of his holdings so just a taste, really. You know my opinion on Facebook as an “investment”. It is one crappy company.

Spot Gold and HUI, daily, August 15th, 2011 to August 15th, 2012

Spot Gold and HUI, daily, August 15th, 2011 to August 15th, 2012

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