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Gold Bugs Index (HUI): Buy, Hold or Sell?

By: Peter Zihlmann | Thursday, August 8, 2013

Up-date N° 17 / August 7, 2013

Amex Gold Bugs Index (HUI)
Buy Date Amount Buy Price Total (USD) Price Today Value Today
March 12, 2003 1 125.54 1    
Total 1 125.54 1 234.78 234.78
Profit   109.24
Profit (in %)   88%
OUR LONG-TERM RECOMMENDATION   STRONG BUY  
OUR SHORT-TERM RECOMMENDATION   STRONG BUY  

HUI Gold Bugs Index Weekly Chart

The NYSE Arca Gold BUGS (Basket of Unhedged Gold Stocks) Index (HUI) is a modified equal dollar weighted index of companies involved in gold mining.

The HUI Index was designed to provide significant exposure to near term movements in gold prices by including companies that do not hedge their gold production beyond 1.5 years.

The HUI Index was developed with a base value of 200.00 as of March 15, 1996. Adjustments are made quarterly after the close of trading on the third Friday of March, June, September & December so that each component stock represents its assigned weight in the index.

The underperformance of gold shares in relation to gold since the beginning of 2004 (and in the 90ties)

NYSE Arca/Gold Weekly Chart

The charts of the price of gold and the HUI-Index reveal astonishing facts:

Gold sometimes outperform gold shares, at times however gold shares fare much better? Following some figures:

Should you rather buy gold shares instead of gold?

First, there are a few basic facts that one has to know:

  1. Gold stocks are more volatile than gold.
  2. It is hard work to select the right companies and to monitor them.
  3. You should know the management.
  4. You should have a long-term view.

As most do not have the time to devote several hours a day

this work is best left to an experienced fund manager. The following chart reveals the risk and rewards of such investment:


Should you own gold rather than gold shares?

On fundamental values, gold and silver shares trade at historic low valuations as in 2008 when you were able to buy companies

Because of this dramatic price decline in these stocks during the past two years, investors have the opportunity to purchase explorers, developers and producers, often referred to as juniors, at about half of the company's net asset value (NAV).

The TIMELESS PRECIOUS METAL FUND and The SIERRA MADRE GOLD & SILVER VENTURE CAPITAL FUND are ideal vehicles to benefit from the coming up-swing of the gold and silver shares in general, but specifically the undervalued junior sector.

Since the low of 2013, some of the gold and silver stocks have recovered nicely, telling how the future may look like:

Aurcana: +93%
Endeavour: +32%
First Majestic: +40%
Fortuna Silver: +34%
Goldcorp: +23%
Paramount Gold: +21%


Conclusion:

BUY GOLD AND SILVER SHARES NOW BEFORE IT IS TOO LATE!

 

Author: Peter Zihlmann

Peter Zihlmann
P. ZIHLMANN INVESTMENT MANAGEMENT AG
www.pzim.ch
invest@pzim.ch

Peter Zihlmann

Chairman of the Board, domiciled in Zurich, Switzerland

Majority shareholder and CEO of P. Zihlmann Investment Management Ltd (the Investment Manager), with over thirty-years experience as an asset manager with different prime banks, and since 1994 CEO of P. Zihlmann Investment Management Ltd.

Your independent Swiss asset manager

THE TIMELESS PRECIOUS METAL FUND
THE SIERRA MADRE GOLD & SILVER VENTURE CAPITAL FUND

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