Gold Indexes: Comparing and Evaluating the HUI, XAU, GDX, XGD and CDNX

By: Lorimer Wilson | Tue, Mar 10, 2009
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Market analysts, investment newsletter writers and financial planners are always commenting on how well, or poorly, the precious metals (read gold) mining sector is doing based on how a particular gold/silver mining index is trending but they are not telling you the whole story.

Why not? Because there are more than 40 precious metals mining indexes (indices) that dice and slice the components of the precious metals mining sector to arrive at a wide variety of insights and using any one of them as a basis on which to comment on the performance of the precious metals mining sector does not accurately reflect the true picture of the sector. Making investment decisions without first knowing how each index is structured; the eligibility criteria; the number of companies included; the specific market capitalization of the components; and the degree of concentration and average market capitalization of each index may lead to imprudent decisions. That's the fundamental problem. Below are descriptions of four popular indices and a fifth one that has been largely overlooked by precious metals stock and warrant investors, analysts and investment newsletter writers alike:

1. HUI is the symbol of the AMEX Gold BUGS (Basket of Un-hedged Gold Stocks) Index and is a modified equal dollar-weighted index of 15 gold mining companies that do not hedge their gold beyond 1.5 years. The best way to invest in this index is in HUI options. See: for current updates.

2. XAU is the symbol of the Philadelphia Gold and Silver Sector Index and is a market capital-ization index of 16 companies in the gold, silver and copper mining industry. The best way to invest in this index is through options traded on the index. For weekly updates see:

3. GDM is the symbol for the NYSE Arca Gold Miners Index and is a modified market capitalization weighted index of 31 gold and silver mining companies. The best way to invest in this index is via the Market Vectors - Gold Miners ETF (GDX). For current updates see:

4. SPTGD is the symbol for the S&P/TSX Global Gold Index and is a modified market capitalization index of 19 precious metals mining companies with a minimum market capitalization of US$240 million with no component having a weight in the index greater or equal to 25%. The index is maintained by the S&P/TSX Canadian Index Committee and is calculated in Canadian dollars. The best way to invest in this index is via the iShares CDN Gold Sector Index ETF (XGD). For weekly updates see:

(GOX is the symbol of another popular gold and silver index called the CBOE Gold Miners Index but it is not included in this analysis as it is limited to only 11, almost exclusively large cap companies and, as such, is hardly representative of the precious metals mining sector as a whole.)

5. CDNX is the symbol for the S&P/TSX Venture Composite Index. This largely overlooked index consists of 558 companies of which 63% are involved in either extracting natural resources from the ground or involved to some degree in the exploration and/or development of such resources. 44% of the companies are engaged in the mining, exploration and/or development of gold and/or silver and other mineral resources; 18% in oil or natural gas pursuits and 38% in non-resources operations.

As Scott Wright concluded in a May'08 article entitled 'Junior Golds and CDNX' at, "Since the CDNX is a junior equity exchange, and since mining is its heaviest-weighted sector, and since gold can be considered the driver of the mining stocks, is it too far-fetched to deduce that the CDNX is indeed a good, not perfect, proxy for the performance of junior gold stocks?" I agree! For updates see:

Below the five indices are compared in detail as never before.

# Component Companies 15 16 31 19 558
% by Market Capitalization (# of Companies)**
Large Cap >6.0B* 80.1% (7) 82.5% (8) 72.1% (8) 77.6% (7) 0.0%
Med. Cap 1.5-<6.0B* 19.4 (6) 15.1 (5) 22.1 (9) 18.7 (8) 0.0
Small Cap .3-<1.5B* 0.3 (1) 2.4 (3) 5.4 (12) 3.7 (4) 0.8 (1)
Micro Cap <.3B* 0.2 (1) 0.0   0.4 (2) 0.0   99.2 (557)
Average Market Cap: $8.1B (15) $8.4B (16) $4.4B (31) $6.6B (19) $23.5M
% Weighting by Company (Mkt. Cap**)
Barrick Gold ($24.2B)* 12.4 19.0 11.0 19.6 NA
Goldcorp ($20.3B)* 14.6 15.2 10.4 16.5 NA
Newmont ($19.0B)* 10.2 14.4 9.0 15.4 NA
Kinross Gold ($10.3B)* 4.6 7.5 5.2 8.6 NA
Anglogold ($10.2B)* 5.5 7.6 5.4 6.7 NA
Freeport McMoRan ($13.3B)* 0.0 8.3 0.0 0.0 NA
Agnico-Eagle ($7.3B)* 5.1 5.6 5.3 5.9 NA
GoldFields ($6.4B)* 5.8 4.8 4.7 5.2 NA
Yamana Gold ($5.8B)* 5.8 4.4 5.3 4.6 NA
Harmony Gold ($4.7B)* 6.2 3.5 4.9 3.1 NA
Eldorado Gold ($3.0B)* 6.1 0.0 5.1 2.4 NA
Top 10 Company Total: 76.3% 90.3% 66.5% 88.0% NA
*U.S. Dollars
**NOTE: Market capitalization changes on a daily basis and the components of the various indexes change frequently as the market changes so it is important to note that the above information was as of March 4th/09. Accessing the hyperlinked references will provide you with current information.
*** Canadian Dollars
% Diversification of Resource by Market Capitalization
Gold (est.) 99.0% 92.0% 96.0% 100.0% 35.5%
Silver (est.) 0.6    5.0    4.0    0.0     
Sub Total: 99.6    97.0    100.0    100.0    35.5   
Other Mining (est.) 0.4    3.0*  0.0    0.0    21.3   
Oil and Gas Exploration 0.0    0.0    0.0    0.0    6.0   
Misc. 0.0    0.0    0.0    0.0    37.2   
* Primarily copper

There you have it and it tells it all! It is clearly evident from the above analysis that:

a) the HUI is a small-based and narrow index of companies engaged in the mining of gold (99.0%) in which the largest 5 companies account for 49.5% of the total index weight.

Conclusion: The HUI Index is best used to assess the trend of large and medium cap gold mining companies and should not be used to assess the trend of precious metals mining companies as a whole.

b) the XAU is also a small-based index of companies but engaged in both gold and silver mining. The largest 5 companies account for a full 64.5% of the total index.

Conclusion: The XAU Index is best used to assess the trend of large cap gold and silver mining companies but should not be used to assess the trend of the precious metals mining sector as a whole.

c) the GDM/GDX is a more broadly based index both in number of companies included, the products mined and in the diverse range of companies included. 26% are large cap companies, 25% medium cap, 39% small and 6% micro).Indeed, the largest 5 companies only account for 41% of the total by index weight. The GTX also has the advantage of being easily traded.

Conclusion: The GDM Index is the best index to assess the trend of all but the smallest of precious metals mining companies. (See Adam Hamilton's, albeit out-dated, Dec.'07 article "GDX Gold-Stock ETF" at for additional insight on the GDX vis-à-vis the HUI and XAU).

d) the SPTGD/XGD is primarily an index of large cap gold mining companies in which the 5 largest components account for 66.8% of the total by index weight.

Conclusion: Since the XGD trades in Canadian dollars it should be used primarily by Canadian investors to track the trend of large cap gold mining stocks and not to assess the trend of the precious metals mining sector as a whole.

e) the CDNX is an extremely broadly based and diverse index of micro-cap companies of which almost 57% are primarily involved in the exploration and development of a diverse variety of natural resources. The remaining 43% of the 558 companies are also in the development stage of operations and, as such, are competing for the same pool of financing and management acumen as the natural resource companies to make their operations viable and prosperous.

Conclusion: The CDNX Index is an excellent proxy for assessing the health, performance and trend of the junior mining sector as a whole and micro-cap companies in general.

The next time you read an article in which someone is claiming that one of the indexes discussed here is revealing this or that about the trend of precious metals mining stocks (and usually gold stocks in particular) you will be in a position to know whether you are being given biased or informed advice and be able to take action accordingly.

'No Bias, No Bull' (with an acknowledgement to Campbell Brown and her CNN program of the same name) is the type of information every successful investor wants to read. I trust this first of three articles on investing in gold mining shares (and warrants) helps you to make informed decisions in the precious metals mining sector.



Author: Lorimer Wilson

Lorimer Wilson

Lorimer Wilson is the Editor of both (a sight/site for sore eyes and inquisitive minds) and (a site consisting of edited excerpts of the internet's most informative articles on money matters). He can be reached at

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