Friday, February 08, 2008

Precious Metal Shares vs the S&P 500

Some people think that the precious metal shares will go down with the overall US stock market, or say the S&P 500. Ok, so how did they do the last time the US stock market topped out in 2000?

Chart comparing the HUI and the S&P 500
Chart from:
Jesse's Café Américain
Thoughts Concerning the Unfolding Economic Crisis

This chart that goes from September of 2000 to February of 2004 is not necessarily what will happen in the future, but still instructive. The HUI ended up about 180% while the S&P 500 got cut almost in half, down about 45%. True, the HUI headed down for about 2 months along with the S&P 500, but that was it for the downside.

There is a big time, screaming head and shoulders topping pattern to the Dow that developed before it started to get serious about going into its current ominous decline, possibly ultimately to 3000 as the US economy skips a serious recession like '73-'74 and goes directly to a Great Depression like '30-'45.

Tidbit from LeMetropoleCafe:

"On that note a well known hedge fund from the West Coast told a colleague that the gold/silver stocks in the junior/exploration sector had gone to a 8 STANDARD DEVIATION to the downside compared to the price of gold and silver. That degree of deviation might be unprecedented."

Remember Newton’s Law.

Currently, it seems much safer to be in the precious metal shares rather than the S&P 500 shares (general US market shares).

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