Thursday, October 6, 2011
Gold - Brent Crude Oil Ratio
While not a perfect measurement of gold mining profitability, this ratio does allow us a look into how the final product of a gold mine, (gold), is doing in relation to one of the single largest expenses involved in mining, namely energy. The higher this ratio, the better for mining companies.
HUI- Daily observations
Gold stocks are closely tracking the broader stock markets moving higher once again on further news out of Europe - this time it was some package of European Central Bank loans that were supposedly being put in place to provide liquidity to European banks who cannot seemingly get loans at what they consider a decent rate of interest in the real market. No worries - the government will loan them the money.
Here we go again - once more we see the unholy alliance between government and business when it comes to "too big to fail banks". Pity the poor mom and pop shops who never had a rich sugar Daddy when they ran out of money and could not obtain loans at a decent rate of interest.
That had the equity markets overlooking the mediocre unemployment report which once again came in over the psychologically significant 400K level. Now we turn our focus to the payrolls number which have been whispered to come in near 60K tomorrow. We'll see. I guess what this means is that if we get 65K, a good portion no doubt coming from that bogus computer Birth/Death model, it will be off to the races for stocks on the "great news" for the economy. The Matrix had nothing on this generation.
Back to the gold mining stocks - they have spiked off the 490 level just as the S&P 500 spiked off the brief foray below the critical 1100 level, a level which infuriated the central planners as it had the market in official bear market territory.
The HUI has now run exactly to the resistance level that comes in near the 540 level. This level needs to be cleared and held to set the sector for further gains. If that occurs, then the big test will be at the 50% Fibonacci retracement level of the recent decline. That is near 560. This level will bring in some sizeable selling so if the bulls can absorb all of that and take it through it, then we have something going.
On the downside, if the equity markets implode tomorrow on the payrolls number then we will probably see selling hit the mining shares which will first test today's low near 520 to see if that will hold. If it does not, back down towards 500 it will go.
Right now, we are all held hostage to the day to day news.
Gold bullion itself managed to push past psychological resistance at $1650, a plus, but until it convincingly clears $1680, it is still rangebound.
Silver must take out $32.50 and hold it to give it a chance at $34. Above that, it begins to trend.
Here we go again - once more we see the unholy alliance between government and business when it comes to "too big to fail banks". Pity the poor mom and pop shops who never had a rich sugar Daddy when they ran out of money and could not obtain loans at a decent rate of interest.
That had the equity markets overlooking the mediocre unemployment report which once again came in over the psychologically significant 400K level. Now we turn our focus to the payrolls number which have been whispered to come in near 60K tomorrow. We'll see. I guess what this means is that if we get 65K, a good portion no doubt coming from that bogus computer Birth/Death model, it will be off to the races for stocks on the "great news" for the economy. The Matrix had nothing on this generation.
Back to the gold mining stocks - they have spiked off the 490 level just as the S&P 500 spiked off the brief foray below the critical 1100 level, a level which infuriated the central planners as it had the market in official bear market territory.
The HUI has now run exactly to the resistance level that comes in near the 540 level. This level needs to be cleared and held to set the sector for further gains. If that occurs, then the big test will be at the 50% Fibonacci retracement level of the recent decline. That is near 560. This level will bring in some sizeable selling so if the bulls can absorb all of that and take it through it, then we have something going.
On the downside, if the equity markets implode tomorrow on the payrolls number then we will probably see selling hit the mining shares which will first test today's low near 520 to see if that will hold. If it does not, back down towards 500 it will go.
Right now, we are all held hostage to the day to day news.
Gold bullion itself managed to push past psychological resistance at $1650, a plus, but until it convincingly clears $1680, it is still rangebound.
Silver must take out $32.50 and hold it to give it a chance at $34. Above that, it begins to trend.
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