"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

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Monday, April 25, 2011

XAU and HUI continue lagging the metals

In the "what else is new" category.....


  1. Watching PM trading in Asia, looks like the gold stock investors were correctly anticipating a major selloff. Looks as if gold has lost $1,500 again.

  2. Dan, would you please opine about why the miners are doing so poorly in relation to the metals?

  3. Peter,

    Check out Dan's post called "Hedge Fund Ratio Spread Trades Continue.

  4. Dan:
    In 2008 I remember Jim saying that even he was surprised by the ferocity of the mining shares drop due to the massive delveraging. Is that not a real possibility now as well, since so much 'cheap money" is the only reason for the s& p highs of today, followed by commodities? or is a decoupling more likely this time for the shares (hui)??-Thanks ED

  5. No way this is 2008 all over again. That said, the miners have no put in their worst ten days in very long time. Seriously Trader Dan, and with all respect, if these hedge trades long the metal/short the miners are in place, logically, the miners should get a bid with the metals tanking. I mean, that is just pure and simple logic. The miners should rally according to the hedge fund trade as outlined here and elsewhere.

  6. SSK - no, they do not have to rally at all. If anything they can go down even faster than the metals themselves. That trade strategy is not static; it is dynamic, and is adjusted according to market conditions.
    That is "the logic" behind the trade. It is not called a "ratio trade" for no reason. The ratio of long positionsn to short positions is constantly being adjusted.

    That being said, one can watch for a point where the HUI and the XAU start getting a firm bid to see where the end of this latest reaction will occur.


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