Thursday, December 10, 2009

The Gold Stock Myth

Otto links to Cam Hui on the subject of Gold mining stocks. all that needs to be added is a long-term chart of the performance of Gold stocks relative to the metal itself:



the blue area plots the XAU index divided by the price of Gold going back to 1984. the black line is the Dollar price of Gold. I used the XAU index because the other mining stock indexes, like HUI, only go back to the mid-90s.

Gold stocks can provide good trading opportunities, and if you look hard enough (or better, subscribe to Otto's newsletter) you'll probably even find the occasional 'good deal'. but as a group and over the longer-term, Gold stocks ain't all that.

and as a small aside, I don't quite understand why Cam equates being a Goldbug with believing that Gold stocks are good investments. a pure Goldbug would never buy any stock, doesn't matter whether the company mines Gold or builds websites or makes cars.