Benchmarking the HUI versus the XAU

There are two gold and silver miners indices frequently referred to:

1. Philadelphia Gold and Silver miners index with ticker ^XAU   (data since Dec 19, 1983) and
2. the AMEX Unhedged Gold Bugs Index with ticker ^HUI (data since Jun 04, 1996)

In a previous posting, I have been checking the long term performance of the present components of the HUI index. Today's focus is on benchmarking the HUI versus the XAU.

In both cases the past reference date has been July 31, 2002. There are data for all present HUI components going back to that date. For the present XAU components this is not the case: Silver Wheaton started quoting on TSX only by end 2004 and on the NYSE only in 2005. The long-term performance over nearly a decade of the HUI is 4.750, meaning that $1 turns into $4.75 over this period. For the ^XAU the long term performance is 3.086. The ^HUI outperforms the ^XAU by an aggregated of 53.9% or an annualized 4.6%.

Miners continue their downward spiral

Precious metals miners are unable to change momentum: despite a recovery of both the gold and silver price on Maudy Thursday (April 5), both our GMP-list based indices continued their slide, with a third consecutive low for the gold miners index. The silver miners index also sets down a fresh low, however the previous one dates back to Dec 28, 2011. No better news for the equal weight index – which is a decent proxy for the junior performance – with equally a fresh low since Dec 28, 2011.

With the cap-weighted gold miners index now at 723, the index has shed 27.7% since it started off on November 19, 2010. Over the same time frame, gold is up 21.6%. The silver miners index lost 19.4% over this time frame, however silver rose 30.8%. (See also the graphs on the blogpage in http://gwyde.blogspot.com/p/gold-miner-pulse.html)

The situation hasn’t improved at all in 2012: with gold still up 4.1% year-to-date (despite repeated sell-offs) and silver up 13.9%, the gold miners index lost 11.2% and even the silver miners index is down 4.5%.

Selecting explorers and junior miners

Searching for excellence

Precious metal explorers as investment vehicles have a long standing track record of extreme volatility. As Rick Rule of Sprot Asset Mgt. USA uses to formulate it: “We have known both the thrill of victory and the agony of defeat”.

Er roert wat bij de vastgoedcertificaten

BRECS index stabiliseert
Na een eerder zwakke periode eind 2011 en begin 2012, is de dalende tendens onderbroken. De BRECS returnindex heeft begin maart opnieuw postgevat boven 68000.

BRECS index  (blauw - linkerschaal) en couponrendement (rood - rechterschaal)

Het gewogen gemiddelde couponrendement bedraagt momenteel 6.31%.

Over de top

De vastgoedcertificaten hebben lang de zwaartekracht getrotseerd en hebben na een indrukwekkende koersrally de Bel20 return aandelenindex ver achter zich gelaten. Eind vorig jaar had ik het er al over dat de BRECS returnindex een stap terug zette. Woluwe Shopping (€1616), een zwaargewicht in de BRECS index, moest na een rally tot een exhuberant koersniveau tenslotte toch stoom afblazen.

Crédit Suisse Global Investment Returns Yearbook 2012

The "Crédit Suisse Global Investment Returns Yearbook 2012" was released last week, which deserves a rapid posting. The yearbook highlights three subjects:

The real value of money
Whoever is determined in thinking a research paper endorsed by a major financial institution can only by a Siren song supporting fiat currency, may need to reconsider.

Just a quote from the introduction:

With international efforts to avert recession, fears have grown about the monetary policy and debt overhang. Sentiment fluctuates between deflationary concerns and inflationary fears and the demand for safe-haven assets has surged. This article examines the dynamics and impact of inflation and examines how equities and bonds have performed under different inflationary conditions.

Currency matters

Investing in global equity rather than just domestically reduces portfolio volatility. Equities tend to outperform following periods of currency weakness, which suggests that more unhedged cross border exposure can be desirable at those times. Contrary to equity, cross border bond investment can add to portfolio risk primarily through currency exposure.

Measuring Risk Appetite

... attitudes towards risk oscillate periodically from over-exhuberance to excessive pessimism and back again. In Feb 1998, Crédit Suisse lauched the Global Risk Appetite Index ...

The MVGDXJ Junior gold mining index

Close to a year ago, I first pointed to this junior mining index used as a benchmark for Van Eck’s GDXJ junior mining ETF. See : A junior gold mining index. Back then, the index was managed by the German firm “4asset-management”. Recently Van Eck took over the index calculation. Its composition and time series are now revealed on Van Eck’s website… for those to whom an access is granted. Whereas initially the access policy seemed rather liberal, now it has become restricted to ‘finance professionals’ (which doesn’t include me as a blogger.) The present posting is therefore the final one on this topic.

Miners' performance relative to precious metals

Abstract
The focus of this article is on the gold and silver miners from a tactical point of view: how do PM miners perform relative to the price of gold or silver. Data used are 2012 Jan 10.
Special attention is paid to the miners covered by the database 'Canadian gold and silver mining', for which a capital weighted index of gold- and silver miners is calculated. Aggregated performance is one thing, it's also very illustrative that miner and explorer performance has been diverging from outperforming the metals by a wide margin to losing ground completely.

Silvermex / Genco

Silvermex Resources Inc. is an emerging silver producer focused on building a profitable, sustainable silver mining company. The Company is led by a highly experienced and successful team, comprised of top executives from leading corporations in the silver mining sector.

Silvermex's core asset is the producing La Guitarra silver-gold property located in the Temascaltepec Mining District of Mexico. Our technical team is currently implementing efficiencies and developing plans to ensure continued production growth throughout the district. The Company's other area of focus is the recently consolidated Rosario/San Marcial Mining Camp in south eastern Sinaloa, Mexico. The Rosario/San Marcial mining concession consists of two past producing mines, resources and historic reserves as well as extensive production related infrastructure already in place.

FIRST MAJESTIC IS ACQUIRING SILVERMEX; THERE WILL BE NO FURTHER UPDATES OF THIS BLOGPAGE.

Website : http://www.silvermexresources.com/s/Home.asp

Northern Dynasty Minerals

Website: www.northerndynastyminerals.com/

Resource
Since acquiring the Pebble Project in 2001, Northern Dynasty has delineated and advanced one of the world's greatest stores of mineral wealth.

Located on American soil in southwest Alaska, the Pebble deposit is remarkable for both its size and composition. Current resource estimate includes 5.94 billion tonnes in the measured and indicated category containing 55 billion lb copper, 66.9 million oz gold and 3.3 billion lb molybdenum; and 4.84 billion tonnes in the inferred category, containing 25.6 billion lb copper, 40.4 million oz gold and 2.3 billion lb molybdenum. Quantities of silver, palladium and rhenium also occur in the deposit.

In 2007, a wholly-owned affiliate of Northern Dynasty entered a 50:50 partnership with a wholly-owned subsidiary of Anglo American plc to permit, construct and operate a modern, long-life mine at Pebble. Based on Anglo American's staged investment of $1.425 to $1.5 billion, both companies share equal ownership, board representation and rights in the Alaska-based Pebble Limited Partnership.

On Sept 16, 2013, Anglo American withdrew from the Pebble Limited Partnership (read:
http://web.tmxmoney.com/article.php?newsid=62679764&qm_symbol=NDM) Though this returns 100% ownership to Northern Dynasty, it also implies that Anglo American no longer considers the Pebble deposit to be a viable project or that the company grew wary by the environmental opposition against it.

Ticker: NDM on TSX and NAK on Amex
Daily Finance: Key statistics for NAK.