Monday, November 14, 2011

Amex Gold Bugs Index - HUI

The Amex Gold Bugs Index (HUI) has been in a trading range for just over a year and will eventually break out to the upside. Why to the upside? Barring any stock market crash or downturn that takes everything down, the Gold and Silver miners are producing excellent earning as they have been selling Gold over $1500 an ounce and Silver over $35 an ounce.

Here is a weekly chart of the HUI index going back to 2002 with the current consolidation period indicated with the rectangle blue box.

The HUI is in an uptrend and is trading between the upper and lower major trend lines with the exception of the 2008 financial market crash.  It is trading near the lower trend line, but a breakout above the 600 area should send shares of solid Gold and Silver miners upwards.

Here is a daily chart of the HUI with the consolidation period indicated with the blue rectangle box.

I've heard that many mutual funds and institutional investors do not know how to evaluate mining shares, so they just stay away from them and invest in a 'regular' company that they understand.

Some may say that the miners have lagged because certain people believe that Gold is in a bubble and it will crash down any day. If that should happen, the miners will have a huge sell off...

With enormous debt in just about every major country, Central banks and the Federal Reserve only know how to deal with the problem with one solution. Increase the money supply or 'print' more fiat. It's really just digital money and $100 bills are not being printed. Image looking at your bank account online and you see $11,543.10.  You can easily put a 0 at the end of it and you'll have $115,430.10, it's that easy for the Federal Reserve.

Back to the HUI, if your holding Gold or Silver stocks, look for them to get a bid within the next 6 months (before May 2012).

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