-- Posted Tuesday, 4 September 2007 | Digg This Article
Your independent Swiss asset manager
THE TIMELESS PRECIOUS METAL FUND
THE SIERRA MADRE GOLD & SILVER VENTURE CAPITAL FUND
September 4, 2007
Amex Gold Bugs Index (HUI) |
Buy Date | Amount | Buy Price | Total (USD) | Price Today | Value Today |
March 12, 2003 | 1 | 125.54 | 1 | | |
Total | 1 | 125.54 | 1 | 327.24 | 327.24 |
Profit | | | | | +201.7 |
Profit (in %) | | | | | 160.7% |
OUR LONG-TERM RECOMMENDATION | | | BUY | |
OUR SHORT-TERM RECOMMENDATION | | | BUY | |
The Long-term Picture
The two previous lengthy consolidation periods within this solid long-term up-trend shown in the chart above in red circles reveal in fact striking similarities. One similarity e.g. is the surge of the Index by more than 100% before the inevitable movement of consolidation began.
If the past is admitted as a guide to the future, we can deduce how far the market may rise during the next up-swing which is currently at our doorstep.
Investors who have been waiting for longer than a year to see their purchase prices again, have a tendency to get out once they can get out even and often miss for this reason the ensuing chance to make a substantial profit.
“Therefore, we should keep our fears in check and ask ourselves without emotions where the market may lead us. In our opinion, it is of course only possible to indicate a range within which this movement could end, and we would place our Index target between 350 points as a minimum and 430 points as a maximum before a further consolidation phase starts.”, we wrote on September 20, 2005, while the Index stood at 237 point. As we now know the Index did in fact peak at 401 points.
As we are in similar situation as in September 2005, we venture at present to set new target range, namely of 680 to 850 points.
The Medium-term Picture
All those who sold in panic in August will likely regret it and will become potential buyers – at prices higher than they sold.
The trading range within which prices have moved up and down since May of last year has well established support and resistance level. It is interesting to note that the last sell-off dried up above the levels seen in 2006. The prices in fact bounced back quickly – an indication that prices were driven down by some impetuous sell-order “at market” with practically no volume.
The Short-term Picture
Amex Gold BUGS Index (HUI) |
The Amex Gold BUGS (Basket of Unhedged Gold Stocks) Index is a modified equal dollar weighted index of companies involved in gold mining. The HUI Index was designed to provide significant exposure to near term movements in gold prices by including companies that do not hedge their gold production beyond 1.5 years. The HUI Index was developed wIth a base value of 200.00 as of March 15, 1996. Adjustments are made quarterly after the close of trading on the third Friday of March, June, September & December so that each component stock represents its assigned weight in the index. BUGS is an acronym for Basket of Unhedged Gold Stocks. The AMEX Gold BUGS Index is comprised of 15 of the nation's largest “unhedged” gold mining stocks. It is a “modified equal-dollar weighted” index. As a result, most of the index's component stocks are equally weighted, yet the largest stocks still carry a greater weight than the smallest. Newmont Mining (see chart below) is the largest component of the Index. |
As above chart demonstrates, big mining companies do not necessarily offer a less risky possibility to participate in the price appreciation potential of gold stocks. Since the gold price touched $720 in May of last year, gold has lost 7% while the share price of Newmont Mining ceded 28%.
In comparison, THE TIMELESS PRECIOUS METAL FUND, which invests in junior gold and silver stocks only receded by 8.5% and gained 61% in 2006.
After the recent correction, we believe that the present rather gloomy attitude of investors towards gold stocks offers a fabulous opportunity to benefit from the next upswing.
For those however who prefer to have their individually managed precious metals portfolios we also offer Portfolio Management services (www.pzim.com).
Above recommendations were valid at the time of writing, viz. at
and may no longer be pertinent when you read them.
Peter Zihlmann
www.pzim.com
invest@pzim
Tel. +41 44 268 51 10
Mobile +41 79 379 51 57
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Disclaimer: P. ZIHLMANN INVESTMENT MANAGEMENT AG does not accept any liability for any loss or damage whatsoever, that may directly or indirectly result from any advice, opinion, information, representation or omission, whether negligent or otherwise, contained in the trading recommendations or in any accompanying chart analyses, whether communicated by word, or message, typed or spoken by any of its employees.
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-- Posted Tuesday, 4 September 2007 | Digg This Article
