"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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Tuesday, January 10, 2012

Mining Shares lagging the broader equity markets since August of last year

The HUI has been lagging the broader US equity markets since August of last year but has found some good buying down near levels commensurate with valued based buying for nearly two years now.

What this tells us is that further rallies in the US equity markets should see corresponding support continuing in the mining sector.

Now if only the ratio trade employed by the hedge funds against the miners in relation to bullion would ever come to an end. For most of 2011, with brief exceptions, the miners lagged poorly against the price of gold. Note the trend has been down but the ratio is now at levels that have attracted a reversal in the spreads last year. The shares remained undervalued when compared to bullion but something will need to change in order to put the nail in the coffin of this spread trade which has gutted the value of so many quality mining companies.

1 comment:

  1. Dan,
    It just continues. Why? Looking at a
    XAU/Price of Gold chart amazes me. Can it be that the Hedgies are manipulating this market on behalf of the Federal Govt for fees in order to keep their larges fears from coming true, that being the protection of the almighty dollar, and to keep the Treasury Ponzi scheme alive? I really would appreciate your views. This is getting so rediculous, the xau/$gold remains under .12 levels. This are market crash levels seen in March of 09. What are your thoughts?


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