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Gold Bug's Index (HUI) & Amex Gold stocks (GDX)


drbubb

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OIL and PRECIOUS METALS stocks

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6125_b.gif

 

"Back in April the last time I worked on this analytical thread, the HUI had an average P/E of 78.2x earnings, a market cap of $86b, and 7 of its 15 components had no earnings at all. Today this has improved a great deal in some ways. Now the HUI is only trading at 28.8x earnings, a massive 63% improvement in about six months! And today "only" 6 of its 15 components can't manage to earn any profits at all these days."

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Then happy days are here again, we are back on track and out of the woods, right? Not yet I fear. While gold stocks have had excellent relative improvements in their valuations over the last six months, in absolute terms they remain very overvalued. Realize that any time the general stock markets trade above 28x earnings it is considered a bubble, a speculative mania like the NASDAQ in 2000. This week the HUI was trading at 28.8x and the XAU at 37.2x, both still in classical bubble territory.

 

The absolute expensiveness of the gold stocks is readily apparent when they are compared to the XOI oil-stock index in the right column above. Not only are the elite major oil stocks now averaging P/E ratios of just 9x earnings, which is very cheap in light of stock-market history, but all of them are earning profits. This is vastly different from the gold stocks on the left, which are either trading at high P/Es or even worse not earning any profits at all despite today's high gold prices.

 

source: http://www.safehaven.com/article-6125.htm

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