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[ThatHawaiiGuy]

Gold Bugs Send Index to 6-Year High
Friday August 8, 2:09 pm ET
By Alden Bentley


NEW YORK (Reuters) - Seeking refuge from an imploding bond market and troubled dollar, investors are piling back into the gold sector, driving shares in pure-gold-play mining stocks Friday to their highest levels in more than six years.

[What imploding bond market? There was no news of an imploding bond market...whatever do they mean? Here on the JFSAG board there was news of it but nobody reads this board...where were all the reports of one of the LARGEST crashes EVER on Yahoo? Or CNBC for that matter...]


On the American Stock Exchange, the HUI Gold Bugs Index (AMEX:^HUI - News) -- comprised of mining companies that only sell gold as it is mined, instead of pre-selling to lock in future prices with forwards and options -- surged 3.3 percent to 174.33, its highest since March 1997.

The spot price of gold bullion and the Philadelphia Stock Exchange's more inclusive XAU Index (Philadelphia:^XAU - News) of gold and silver mining shares were also grinding higher but lagged the non-hedgers, which some small investors and portfolio managers see as a more liquid proxy for physical metal.

The XAU Index was up 2.5 percent at 84.73.

"The stocks are telling you that gold should do something," said Caesar Bryan, manager of the $210 million Gabelli Gold Fund. "People buying the equities clearly think that the gold price is probably going to make some progress."

The HUI is up 18 percent this year, doubling the 9.5 percent gain in the XAU and the 9.8 percent rise in the Dow Jones industrial stock average.

The XAU is considered the benchmark U.S. precious metals index. But the HUI has stolen some of the attention this year as miners re-thought long-time hedging programs under pressure from investors angered at companies that overhedged and could not benefit from rallying bullion prices.

Newmont Mining Corp. (NYSE:NEM - News), the world's largest gold company, also set a new high at $38.24 on the New York Stock Exchange (News - Websites) Friday, continuing to capitalize on an anti-hedging policy.

Greg Weldon, publisher of Metal Monitor and Money Monitor, said "That same breakout is not being confirmed by the hedged XAU and some of the other blue chippers," specifying AngloGold Ltd. (ANGJ.J) of South Africa and Barrick Gold Corp. (Toronto:ABX.TO - News) of Toronto, both hedgers, which round out the top three producers.

"Is this simply money flow out of bonds and bond funds and into shares as we see the stock-bond ratio flip the other way toward stocks again?" he mused. "Since financial shares are on the ropes ... You are looking at cyclicals, and more specifically some of the base metal stocks have gotten a bid and some of the leading mining shares."

Newmont, with a market capitalization of $14 billion, rose from No. 2 to No. 1 in the industry last year after acquiring Australia's Normandy Mining in a three-way deal with Canada's Franco-Nevada Mining Corp. Ltd.

It immediately vowed to unwind some 10 million ounces of Normandy's hedges, a task it has nearly completed.

Gold was the winningest stock sector in 2002 and remained a darling this year, as nervous financial markets favored hard assets while the United States went to war in Iraq and the economy teetered on the brink of recession and deflation.

[Can I get yet another ITOLUSO?]

Bullion rose to its highest price since 1996 in February. While its current price around $357 is off some $31 from the $388 peak, there has been no sustained let-up in interest.

Ironically, mining companies last year turned into net buyers of gold as they unwound forward sales. For years gold bugs had complained that hedging was depressing the gold price.

This contributed to the about-face in sentiment since 2001. In the 1990s gold looked like a relic of the old economy and its price hit a 20-year low at $252 an ounce in 1999 before the stock market boom went bust. (Additional reporting by David Brinkerhoff)


http://biz.yahoo.com/rb/030808/markets_gold_index_1.html


Yeah, I'm tooting my own horn, so what?]