I.O.U. something: GOLDSTOCKS vs GOLD comparison performance charts!
So, a few blogs earlier I compared gold, the metal, vs the S&P 500. We saw that gold simply vastly crushed the S&P 500, as gold rose about 200% and the S&P 500 (SPX) rose... I mean fell 40% since the bull market top in stocks in March 2000. But what about goldstocks?
So let's have comparison charts between gold the metal, XAU the gold/silver index, GDM the goldminers index, GDX the gold miners ETF and finally HUI the so called gold bugs index, as it contains the best unhedged or low hedged gold stocks. Gold stocks are supposed to outperform gold.
So as the SPX has made minus 40% since the bull market top, gold the metal has made plus 225%. XAU, the gold and silver mining index has made 120%, only! It also contains hedged goldstocks. GDM, the goldminers index however has made 255%, GDX, the goldstock ETF, has made 260%. And finally, HUI the goldbugs index has made 380% since the top of the bull market in March 2000. And in Q1 2008 it was even 600% ahead, before correcting with the market.
So since the HUI "goldbugs" index has so widely outperformed the other indices, my advice would be to buy all stocks contained in the HUI according to their market cap, if you want to mirror the performance of the HUI goldbugs index, and simply let it ride. Because their individual relative outperformance may change, no, WILL change over time. Which means that some of the highly riding goldstocks may correct quite a lot, over time but should recover again, while others may take the lead. But overall the index should continue to crush any asset class, anything...! You only care about the total performance of the basket you bought, not individual stocks, and that the trend will continue.
Alternatively simply buy the GDX Marketvectors ETF, which contains a broad choice of gold stocks (see performance above). Or of course gold itself. As Americans you can do this easily by buying the gold ETF GLD which is backed by stored and "allocated" gold stored deep below London/UK by HSBC and affiliated banks. It is a very safe ETF.
And again, looking at the inflationary government and central bank policies worldwide (please ignore when they talk tough about controlling inflation, it's just talk) I am pretty confident, that the gold bull market will continue for 5-10 years more. In fact I think that the best times are yet to come!
There won't be any deflation, the central banks won't allow it. They will simply print more money. Look at your bills, do they go down? There will be inflation a couple of years ahead. How much? I have no idea!
Here are the stocks contained in each index according zo relative strentgh, if you want to put your own index/buylist together.
GSS, IAG, GOLD, KGC, GG, EGO, ABX, GFI, AEM, HL, BVN, CDE, AUY, HMY, NEM
NGD, NXG, GSS, IAG, GOLD, SA, KGC, GG, EGO, GBG, AU, ABX, GFI, AEM, LIHR, RGLD, HL, BVN, CDE, AUY, GRS, SSRI, NSU, PAAS, HMY, NEM, SLW, MFN, TRE, AZK, VGZ
GOLD, KGC, GG, FCX, AU, ABX, GFI, AEM, RGLD, CDE, AUY, SSRI, PAAS, HMY, NEM, SLW
Golden Luck! ;-) But don't forget, it will be a volatile ride!