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Sunday, June 27, 2010

CHART OF THE WEEK: THE GOLD STOCK DIVERGENCE CONTINUES…


This week's chart shows the continuation of a trend we highlighted early this month… the outperformance of gold stocks versus the general stock market.

Up until late April, shares of gold mining companies registered the same year-to-date gains as the benchmark S&P 500 index. But at the beginning of May – when the general market started to crack – gold stocks began diverging in performance from the market. It was an incredible display of strength for gold stocks to hold steady while folks sold stocks of all stripes to raise cash.

As you can see from this week's "performance chart," the big gold stock fund (GDX) is up 20% in the past three months (the black line). The general market, on the other hand, is down 7.5% during the same time (the blue line).

As gold miners enjoy the robust economics of selling gold for over $1,100 per ounce, expect this trend of gold stock outperformance to continue.

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