The gold bugs index (HUI) closed at 301.15 with gold just managing to stay above the $800/oz level on Friday. What an aberration! The HUI is down to a level last seen in 2006 when gold was trading just above the $500/oz level.
Since the start of 2006 gold has gained around 60% in value with the stocks lagging behind slightly until this year when they give back about 80% of that gain to register a mere 10% gain for the same period. Its true that the dollar has rallied and the oil price has tumbled which no doubt has thrown a wet blanket over the precious metals sector, but the sell off in the mining sector has been devastating.
As regular readers will know we have been buyers through what we thought was a lacklustre summer season for gold mining stocks but even our most recent purchases have been hit hard over the last month or so. Producers such Yamana, which is down below $9.00 could have been purchased for the same price in early 2006. How a gold producer can trade for the same price when gold is $500/oz or $800/oz is just bizarre. We are either looking at the buying opportunity of a lifetime or there is something dramatically wrong here and we just have not seen it.
This is a gut wrenching pull back that has caused many investors to bail out some with heavy loses. Is it over now? Well we are struggling to see just what could cause the HUI to fall further but we have been wrong before. Its at times like these that we tend to get thrown off our plan and spend a period of time differing and then look back and regret selling our stocks or not buying more when the window of opportunity stared us smack in the face!
As ridiculous as this may this sound we have decided to hold on to what we have and tough it out. We have a small amount of cash remaining in our opportunity fund, enough for say one more purchase then we will be 100% fully invested.
So, for us we will search through this carnage with the view to picking up a quality gold producer at a rock bottom price. After that all we can do is sweat!
Does the same apply to silver stocks? Not quite! If we take a quick look at the silver sector we can see that Hecla mining is trading at the $6.00 level and it too could have been purchased for that very same price in early 2006. However silver has almost halved since it hit a recent high of $21/oz, which makes Hecla’s and other silver producing stock prices a little easier to understand.
These are very difficult and challenging times and its essential that you stay up to date with what is going on in the market. For our latest commentary and trading signals on gold, click here to subscribe to The FREE Gold Prices Newsletter and click here for The FREE Silver Prices Newsletter.