I am reading Doody's Gold Stock Analyst for this month, and looking at the history of this gold bull market since 2001.

Granted, many are frustrated. But I just want to point out to you how absurdly cheap every gold stock is out there. This is no pollyanna, this is just my analysis of the numbers. Look them up for yourself if you don't believe me:

The XAU gold index is currently trading at 118. With gold prices at 835 as I am writing this, that gives a ratio of 7/1. THIS IS THE HIGHEST RATIO IN THE HISTORY OF THIS GOLD BULL MARKET, including early 2001, before the price of gold started to rise. This means that, gold shares are now the cheapest they have been in the seven years of this bull market relative to the price of gold.

The first time the XAU was at 118 was in 2003. Gold prices were at $425/oz. The market is valuing the gold companies the same, even though the price of their product has doubled.

The 7-year average ratio of Gold/XAU is 5. The lowest this ratio has ever been is roughly 3. At 7, we are literally off the charts right now.

The chart of the Gold/XAU history looks so artificial to me right now. It moved in waves, between 3.5 and 5.5, for the last 7 years. In the last six months, it has made a B-line up to 7.0. It looks about as artificial as the B-line the dollar has made in the last 2 months.

There is no way to know how long the reading will stay off the charts, or if we are going to go off the entire page. But all I am saying is, in the past, the best time to buy something has always been when they are most out of favor. Gold stocks are the most out of favor they have ever been relative to the price of gold. For those who fundamentally understand that the price of gold must go higher in the long run, there has mathematically never been a cheaper time to own the companies that produce the damn stuff.

Hysteria