Gold Stocks vs. Bullion
May 6, 2009 by goldguru · Leave a Comment
Gold and gold shares do not move in a parallel fashion…
PETER ZIHLMANN founded the P. Zihlmann Investment Management Companyin Zurich, Switzerland in 1994, making precious metals and Gold Mining shares one of his specialties.
Speaking here to The Gold Report, he discusses the case for gold shares, with a focus on junior miners.
The Gold Report: In your Sierra Madre Gold & Silver Fund’s Q1’09 quarterly statement you state, “Junior gold and silver mining companies are at bargain levels.” Can you talk about your outlook for gold, and why you think the juniors are bargains?
Peter Zihlmann: Gold and gold shares do not move in a parallel fashion. Sometimes gold is leading, and at other times the gold shares lead. Gold shares over the long term show a far better performance than the metal – in fact, since the start of the bull market, gold shares have outperformed gold at a ratio of 5-to-1. We not only believe the long-term up-trend for gold is positive, but also that technical indicators for equities are improving and indicate a heavily oversold market.
The HUI Gold Bugs Index, which represents a portfolio of 15 major gold mining companies, recently dropped to its 2002 level, when gold traded between $250 and $350, but has since regained almost 115%. Gold stocks are now outperforming gold; however, many companies are still trading for the value of their liquid assets.
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