Bob Kirtley: There are numerous precious metals mining companies (NYSEARCA:GDX) on various Stock Exchanges around the world vying for our investment funds and it is only with great care and hard work can we expect to select those that will be successful. However, before we get to the point of entry in terms of acquisitions, we need to be sure that this sector in general is heading in the right direction so that our well-chosen stocks benefit from a move to higher ground.
In assessing the current investment environment we need to decide if the current rally has the legs to carry our stocks to new highs or is this rally a false dawn tempting investors to part with their hard earned cash only to disappoint them further down the track. In order to throw some light on the matter we will refer to The AMEX Gold BUGS (Basket of Unhedged Gold Stocks) Index, the HUI.
The chart above gives us a snap shot of the last four years depicting the peak at 630 in September 2011 through to today’s position of 251, registering a loss of 375 points or 60%.
We can also see that the recent low point for the HUI occurred in July at around 210 before rallying to 280. The HUI has tried twice to penetrate the 280 level and failed which is disappointing; maybe it suffered from a minor bout of profit taking. The HUI has since fallen back to 251, which is only 16% above the low point of 210, which does little to boost my confidence in this rally. If we compare this rally to the rally we had at this time last year when the HUI moved from 400 to 520 it pales into insignificance. There are however some mining stocks that have performed better than others giving investors some respite from the prior carnage, but overall this is still a poor show.
On the positive side Labor Day is behind us as we head into the fall season which on a seasonality basis is usually good for gold. We understand that the demand for physical gold remains strong with enthusiastic buying coming from the East.(...)Click here to continue reading the original ETFDailyNews.com article: What To Expect From Gold Mining Stocks?You are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)
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