Palisade Research - Thu, Jun 23, 2016

Five Charts Showing Why Gold Stocks Have Never Been This Cheap!

silhouette of a bull on top of a mountain pic

1.

1991 to 2015 line chart of the Bloomberg Commodity Index vs. S&P 500

It appeared the gap between the S&P and the Bloomberg Commodity Index was finally beginning to close when we first published this chart. However, it was apparently just a flash crash for the S&P 500 as the index continues to climb, while commodities in general continue to languish. Gold remains the strongest commodity, however, its recovery still has not been able to move the commodity index as a whole, unlike in previous bull runs

2.

1990 to present area chart highlighting bull and bear TSX Venture markets

Investors rejoiced as the TSX Venture bear market finally ended after a staggering 1,200 days, when the index reached a record-breaking loss of 80%. We are now in a full-fledged bull market, however, there is a lot more room to run. The last two bull markets lasted 1,142 days and 573 days, respectively, and yielded returns of 266% and 222%.

3.

10-year line chart showing the ratio of the $HUI Gold Bugs Index to the gold price

The ratio between the Gold BUGS Index and the price of gold finally bottomed out and is on the upswing. While gold stocks have been performing very well, the ratio just recently cleared its historical low achieved in 2000. With gold prices poised to continue to appreciate, not only does the HUI need to catch up, but needs to kick into overdrive to reach a historical median. These stocks scream buying opportunity!

4.

5-year line chart showing the Barron's Gold Mining Index compared to past bear markets

Playing off a chart made famous by our friend, Jordan Roy-Byrne, at The Daily Gold, it's more than apparent that BGMI is finally on the mends. However, not after surpassing all other bear markets in terms of length and total loss.

5.

line chart back to 1983 showing the S&P 500 to Gold/Silver Sector ratio

The divergence between these two indices remain exaggerated and unprecedented. Something has to give and our money is on both the S&P retreating and the gold/silver sector continuing to appreciate at a torrid rate.

Click here for the original charts.

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