2008 Year-End Investor Letter

09 January 2009

Why you should be in gold shares this year

In this most tumultuous year for the financial markets, gold bullion rose 5.8%. In so doing, it outperformed all asset classes and investment strategies other than unadulterated short selling. Unfortunately, gold shares lost their traditional connection to the gold price and behaved like stocks. The benchmark XAU index declined 27.7%, and small cap gold stocks did much worse. The chart below depicting the relationship between gold shares and the bullion price shows that gold shares became more undervalued relative to bullion than at any point in the past 25 years.

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John Hathaway 
09 Jan 2009