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« $1,300 on Double Dip, GFMS Forecasts | Main | Gold Prices Update 06 June 2010 »

The Gold Bugs Index (HUI) Update 08 June 2010

HUI Chart 08 June 2010.jpg

Gold prices put in another really good performance today, flirting with the $1240/oz level before easing back slightly, silver prices also joined in the fun with a bounce back of $0.74/oz or 4.25%, all despite the dollar hitting 88.51.

In our quest to maximize returns from this precious metals bull market we have a large chunk of our investment funds deployed in gold and silver mining companies. The reason for this is to gain exposure on a leveraged basis to the performance of gold and silver. Over recent months with have expressed our concern as the stocks have not sparkled as they once did in the early part of this bull market. It may be that they are taking a breather before resuming a rally that will see the stocks head north in dramatic fashion. However, with the number and variety of alternatives available to the investment community such as the gold funds, we are faced with a situation of the cash that may have been deployed in the mining sector now being channeled into other vehicles. Although we expect these alternatives to attract some of the funds we remain uneasy as to just how much of this cash will find a new home giving it exposure to this bull market without having to shoulder the risks inherent in the mining industry.

Taking a quick look at the chart we can see that the HUI is finding it hard to keep up with gold prices at the moment, as the gap between them indicates. With gold moving up very well indeed we had expected the stocks to catapult past the golden metal in a dazzling style. Instead all we got was a sluggish response. This is a concern that we have raised a few times for discussion but, as yet, we don't have a clear view of the future for precious metals stocks. They are in the doldrums at the moment so we are looking for them to pick up the bat and as Jim Sinclair said, outperform gold by a factor of 5:1. Alternatively we need to consider the other vehicles more seriously and maybe incorporate the use of options trading to give us the added leverage that we believe should be possible in this market.

Have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

The latest trade from our options team was slightly more sophisticated in that we shorted a PUT as follows:

On Friday 7th May our premium options trading service OPTIONTRADER opened a speculative short term trade on GLD Puts, signalling to short sell the $105 May-10 Puts series at $0.09.

On Tuesday the 11th May we bought back the puts for just $0.05, making a 44.44% profit in just 4 days.

Accumulated Profits from Investing $1000 in each OPTIONTRADE signal 14 May 2010.jpg

Recently our premium options trading service OPTIONTRADER has been putting in a great performance, the last 16 trades with an average gain of 42.73% per trade, in an average of just under 38 days per trade. Click here to sign up or find out more. have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

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