Another disappointing night on the HUI with the index down...

Another disappointing night on the HUI with the index down nearly 1% while gold rose about US$20 from the HUI Thursday close.

What caught my eye was once again the counter intuitive heavy selling of HUI stocks that were strongly rising. It's like an "invisible hand" was in action.

For example:

Anglogold Ashanti Ltd.
Day's high $43.66
Closing price $41.81

Barrick Gold Corp
Day's high $47.26
Closing price $45.86

Newmont Mining Corp
Day's high $56.52
Closing price $54.41

Once again this selling and underperformance compared to gold would deter your average American from investing in HUI gold stocks.

Instead they are being herded into the heavily promoted exchange traded funds, which they are told is a "safe" and "convenient" way to invest in physical gold and physical silver. How "safe" on a number of fronts we will find out in the future imo.

Chris Powell had this to say at the GATA Gold Rush 2011
Conference on Friday:

"...there are the deception and conflicts of interest built into the prospectuses of gold and silver exchange-traded funds, whose metal custodians happen also to be the world's biggest gold and silver shorters."

At http://www.gata.org/node/10217

I had a look at the market capitalisation of the 14 HUI stocks. Here is the information I obtained from Yahoo Finance:

Agnico Eagle Mines Ltd Symbol: AEM $9.52 billion

Anglogold Ashanti Ltd Symbol: AU $16.12 billion

Barrick Gold Corp Symbol: ABX $45.83 billion

Coeur D Alene Mines Corp Symbol: CDE $2.19 billion

Compania de Minas Buenaventura Symbol: BVN $10.06 billion

Gold Fields Ltd Symbol: GFI $10.68 billion

Goldcorp Inc Symbol: GG - $37.42 billion

Harmony Gold Mining Co Ltd Symbol: HMY$5.65 billion

Hecla Mining Co Symbol: HL $2.00 billion

Iamgold Corp Symbol: IAG $7.23 billion

Kinross Gold Corp Symbol: KGC $17.79 billion

Newmont Mining Corp Symbol: NEM $26.89 billion

Randgold Resources Ltd Symbol: GOLD $8.60 billion

Yamana Gold Inc Symbol: AUY $9.85 billion

The market capitalisation of the entire HUI is just US$209.83 billion. That is a miniscule amount today when we now hear talk about trillions of dollars - like the 14 trillion plus US debt ceiling. By contrast, just one of the 30 Dow stocks, Exxon Mobil Corporation has a market capitalisation of US$368.57 billion. That is 80% more than the entire HUI!!

Microsoft Corporation has a market capitalisation of US$215.15 billion, retailer Wal-Mart Stores Inc a market capitalisation of US$176.58 billion ... and the list goes on and on.... (Info from Yahoo finance at http://au.finance.yahoo.com/q/cp?s=%5EDJI)

The USA population is 311 million. That is equivalent to an average investment of just US$673 per person in a HUI stock. If the value of this investment rose to just US$1,246 per person the HUI would rise by 100%. If the value of this investment rose to US$5,000 per person the HUI would rise by 643%.

No wonder Americans are being herded into gold and silver exchange-traded funds whose metal custodians happen also to be the world's biggest gold and silver shorters.

At this point in time there is a massive disconnect between the HUI and the US$1660 price of gold, with the HUI being the same as when gold briefly hit US$1000 in early 2008!!

But the gold price is continuing to rise. As this rise accelerates, the profits of HUI stocks will soar. When you consider Americans are earning close to zero interest in their bank accounts and the Dow has gone nowhere this century, it won't take very much increased investment interest for the HUI stocks to explode on the back of sharply rising profits and dividends.

As investment interest picks up, rising to a crescendo, as it will in gold shares imo, then we will be in for one of the wildest stock market booms in our lifetimes with fortunes able to be made by canny investors who did not get shaken out of qualirty gold equities imo.