The AMEX Gold Bugs Index (HUI)

Interactive chart .HUI - compare this with GLD ( which follows gold physical index ), you see 65%? gain from "Nov 20 - Nov 28 " compared to small gain in GLD .
- Same thing was pointed in traderNarative post below
- asr: explore "LONG HUI/short GLD" which the numbers favour for above kind of 1 week period . Conversly opposite when HUI is high . Need more back testing.

AMEX GOLD BUGS INDEX (^HUI) -- show components

The AMEX Gold BUGS(Basket of Unhedged Gold Stocks)Index represents a portfolio of 13 major gold mining companies.The Index is designed to give investors significant exposure to near term movements in gold prices - by including companies that do not hedge their gold production beyond 1 1/2 years.

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AMEX’s Gold BUGS Index (HUI) and the Philadelphia Stock Exchange’s XAU

Overview
Two major gold indices dominate the market - the AMEX’s Gold BUGS Index (HUI) and the Philadelphia Stock Exchange’s XAU

The major difference between the two is that the BUGS index is made up exclusively of mining stocks that do not hedge their gold positions more than a year-and-a-half into the future. This makes the BUGS Index much more profitable than the XAU when gold prices are rising, but can also compound its losses when gold declines. BUGS is an acronym for Basket of Unhedged Gold Stocks. The index was introduced on March 15, 1996 with a starting value of 200.

Positives
When gold prices are on the rise, the Gold BUGS Index provides an excellent way for investors to capitalize on that increase. The index has a high correlation to the spot price (current price) of gold.

Drawbacks
When the price of gold declines, the Gold BUGS Index tends to fall much faster than its hedged cousin, the XAU. In addition, the firm's unusual index weighting system can be difficult to understand.

Composition
The AMEX Gold BUGS Index is comprised of 15 of the nation's largest “unhedged” gold mining stocks. It is a “modified equal-dollar weighted” index. As a result, most of the index's component stocks are equally weighted, yet the largest stocks still carry a greater weight than the smallest.
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Guess Which Index Rallied 65%

- Interestingly enough, within the same time period physical gold rallied only 18%, going from a low of $700 per oz. to a high of $825.
- The previous counter rally in September was a respectable 40% but still a baby compared to this one.
- I guess my point is that gold and gold stocks are like everything else, supposed to be borrowed for a trade, not married for life.