Golden Minerals Company

A few charts and an article that clearly show that silver suppression reaches its peak this time of year and then fades somewhat later on.

Regards - VHF

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3 Gold Charts You Need To See

Sean Brodrick

June 27, 2011

We may be coming to the time when you should be adding to your portfolio of mining stocks. Why? Well, a picture is worth a thousand words, so let me give you three thousand words of pictures, and some easy ways to play the next move higher in gold miners.

Chart #1: Gold Miners Are Dirt-Cheap.

Here’s a chart showing the AMEX Gold Bugs Index (HUI), a basket of leading gold miners. You can see lines for the price of the index and its price-to-earnings value.

Looking at the chart, you can see that gold miners haven’t been this cheap — relative to earnings — since the 2008 economic crisis.

While the HUI’s share price can go lower, the potential downside is probably limited because value buyers will start scooping up shares.

Meanwhile, the P/E upside for both the HUI and the individual miners in it is huge.

Why are these stocks so relatively cheap? Because the price of the metal they mine has gone up and their stock prices haven’t. And that brings me to my second chart.

Chart #2: Gold Miners Vs. the Price of Gold

Gold miners haven’t been this cheap compared to the price of gold since April 2010, as you’ll see in this next chart:

To be sure, miners can get cheaper compared to the price of gold. They did that during the depths of the financial panic in 2008.

Are you expecting another financial panic? If so, you won’t mind waiting for these miners to get cheaper again. But if you think we’re unlikely to see a panic for the rest of this year, you might get your shopping list ready.

Finally, there’s this …

Chart #3: Summer Weakness Leads to Fall Frenzy for Gold Miners

Gold mining stocks experience seasonal movements. In other words, these stocks traditionally do better in some months (on average) than others.

Here is a chart showing annualized increases and decreases by month in the HUI:

Historically speaking, June and July are two of the worst months for gold miners, coming second only to October. But summer weakness leads to outstanding performance in August and September.

Now, you don’t want to put too much weight into seasonality. But you don’t want to ignore it either, especially when you add in that miners are A) cheap on a price-to-earnings basis and B) cheap compared to gold itself.

The Easy Way to Play Gold’s Next Rally

The Market Vectors Gold Miners Index (GDX) is, like the HUI, another basket of miners. Unlike the HUI, you can buy the GDX like a stock. Its holdings include Barrick Gold, Goldcorp, Newmont Mining, Kinross, Lihir Gold, Randgold, Silver Wheaton and more.

Many of these stocks have been hammered down to huge discounts. Take a look at this table:

If you feel like picking and choosing, you could select one or more of these stocks. Or you could just buy the GDX itself. It may get cheaper, but probably not much. And if gold breaks out to the upside, it could get a lot more expensive in a hurry.