"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


Tuesday, October 25, 2011

HUI attempting to make up lost ground against the S&P 500

If one goes back to the beginning of July of this year, you can see that for the next two months, the mining shares were outperforming the broader equity markets as a whole.

Once September rolled around, the shares gave back their gains against the broader market and severely underperformed. With today's strong surge higher, we might be seeing the reversal of this recent lagging in terms of performance.

Much depends on the willingness of traders to see gold and silver as "SAFE HAVENS" and not as part of the broader risk trade. The reason the mining shares are doing so well in today's session, especially with the broad based selling across the general equity world, is that traders/investors have re-awakened to both gold and silver as safe havens in the midst of some very palpable fears about the shaky European debt crisis. As money flows have returned to those precious metals, flows are also coming into the mining shares which will of course benefit if the metals continue to move higher.

One day a trend does not make but this is such a drastic departure from recent behavior that it must be noted and also closely watched to see if this is the start of something significant.

As a side note - if the chart pattern is moving higher, the HUI is outperforming the broader US equity markets. The opposite is true if the pattern is moving lower. Note the sharp surge higher in this ratio and the breach of the downtrend.


  1. of course, we know the worse thing that happened to gold was the straight up run up of august.....repairing technicals is not fun for longs.

    MIG banks gold short stop was triggered at 1704$ today.

    jesse reminded tomorrow is gold expiration day....... conveniently on merkozy BS day i notice.

    i'll be watching all night w/one eye,dan.

    especially at 9-10 am NYT to see if they bust the london fix down.

  2. Unfortunately we had the usual drop into the close.

  3. I love the inside baseball chatter, and would like to add a thing or two. Mondays biggest news for the mining industry came from caterpillar as it's earnings call specifically sited "the rising prices in precious metals" as the primary reason for the company's blowout quarter. I believe that this was the main catalyst which started us off on a good note this week. Citi also raised their target price for gold on Monday, which I believe helped in the momentum. This is the time which I have been waiting for desperately, being bludgeoned by the shorts and bears in the mining shares..... EARNINGS SEASON! There should be an incredible amount of positive numbers and statements from companies and CEOs over the next two weeks during their earnings calls. Relatively cheap energy and extremely high demand and prices for gold should squeeze the shorts who are still foolish enough to hold their positions and, more importantly, propel long side investment into these extremely undervalued companies. Also, and no less important, news out of Europe should be extremely juicy for gold bulls. Europe has one of two options, both of which are extremely healthy for gold. They can choose to DEFAULT or DEVALUE their currency by way of massive bond purchasing by the EU. I am sure they will choose the latter, fire up the printing presses and paper over the problem. Not to be outdone or to have his currency "out-weakened" I think we will see Uncle Ben Bernanke respond by doing the same with QE3, keeping the battle for the lowest currency in order. Back to earnings season though. The reporting companies certainly have a better grasp on the commodity which drives their industry than the average observer, and I will be listening intently to those earnings calls. I would expect that in an environment like this with low company marketcaps, record high profits and a solid, longterm outlook for gold, we will be hearing rumblings of some dividend hikes, but even more importantly, mergers and aquisitions. Let the conversation begin!

    Dan, thank you for your blog I read it daily and listen to your weekly interviews. The check is in the mail for all the space Ive filled!! Thank you, Joe


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