"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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Thursday, July 12, 2012

HUI to Gold Ratio Dipping Down Towards Undervaluation Levels Once Again

The breech of the 400 level in the HUI has brought out some further stop-loss related selling as well as fresh shorting by hungry bears in the sector. GoldCorp's news from yesterday is still impacting the miners in general.

That being said, the underperformance of the mining shares against the price of Gold is dropping this important ratio down toward those levels which have been considered as "undervalued" once again. While it is small consolation to mining equity bulls to see the value of their holdings being diminished once again, it does appear that we are entering a region that should engender value based accumulation sooner rather than later.

In one sense, the miners are suffering from the same fate as gold bullion as it waits for further signs of QE from the Federal Reserve. However, there are also some cases where disappointing fundamental news has given some hedge funds the boldness to ply those ratio spread trades of theirs once again.


  1. Dan,
    Would you say we are seeing a huge reverse head and shoulders on the HUI to Gold ratio? We are getting close to the bottom and a strong reversal could happen as soon as the end of July?

    Crazy manipulated gold market!! When (IF it ever happens people being so much down, busy to just survive, they are now as Jim said "blind or Brain dead") people finally wake up the rise would be meteoric. But for this to happen politicians in Europe and the USA will have to shot down their allies (the banks) and put the blame on them. This process has already started (Barclays) and should continue on this side of the Ocean before the November elections.

  2. Maybe the reason for the ratio being in such a long-term downtrend is that the costs of mining is rising so much.

    At least that is what a mining exec in Vancouver says. No mention that someone is intentionally manipulating his share price downwards.

    Nobody likes seeing their shares suffer (and I can surely sympathize with suffering losses) but blaming market manipulation for your trade losses sounds like denial and a recipe for more losses.

  3. Dan,

    I was looking at the chart of gold priced in currencies other than US$ last night. Very interesting. Would you mind throwing up a few charts with your comments please?

    Thanks in advance.

  4. J,

    There is definitely something wrong when you have watched these shares deteriorate in the face of increased gold prices. Yes there is some effect given the major input of miners being "energy", as well as the "share dilution". But, and it is a very large BUTT, the shares have been shorted for certain. You know, just like the JPM shares increasing 6% the same day they announced they blundered 5 billion in losses. Hmmmm? Yes, their earnings exceeded the so called "street" estimates, but it is all a manipulation now. JPM is a thieving, cannivin bunch led by the master thief himself. I cannot wait until the derivative market "slays" JPM. I will hold a large celebratory party. For that matter as soon as Pelosi Galore, D Head Reid, and the other "lets steal everyone elses money" and give it to who we want mode finally collapses, I will be wearing a party hat singing with many friends. The chart everyone should really be viewing is the "Smith and Wesson" chart. Wow, what a rise since the election of our current king. I bet even he fears that. Even if he gets his way and the brillian move he makes giving away sovereign gun ownership lawmaking to the United Notions, I would like to see the IRS come over and attempt to remove my weapons and silver. They will see plenty of LEAD.

  5. SWHC aka Smith and Wesson holding company. Jan 09-"2 handle"
    Today "9 Handle" 450% Gain.

    Yes, we have a problem Captain Give Away, Dictator and the people know it.
    And if he our king is re-elected, I bet it goes to 20 Handle.

  6. Sorry Dan, just venting a bit after todays JPM print. I apologize to all if this offends. Not!!

  7. I am sure the morgue would do anything for a profit. But where is the high profit in shorting already-depressed gold shares? A bank speculator is just as likely to try going long of cheap shares, I think. The bankers are evil but not stupid.

    1. With all due respect: Wake up and smell the coffee.

      Banks (and hedge funds) have their own agenda. They also have the power we lack all of us small investors. They are aligned with the politicians and act with AND for them. It is what they call themselves "an elite" for whom there are no rules except the ones they set-up.
      Jim Sinclair is saying that Bernanke will have to start QE3... in order for Obama to have a chance to be re-elected...this is what I am talking about: collusion between political and financial powers.
      Last thing about manipulation: Unemployment rate:
      In order for the rate to stay the same the US economy has to create a minimum of 200-250K jobs a month. Check the numbers in the last 12 months and you will see that it is impossible to have the official number stated today of 8.2%. We should be close to 13%... Manipulation...manipulation.
      Have a wonderful week-end.

    2. Gold and silver keep falling so those with a losing hand make excuses. Like manipulation bla-bla-bla.

      Just another krazy conspiracy theory.

      Also, the moon landing was a hollywood stunt. And adolf hitler is alive and well and running china from a bunker below the forbidden city. LOL

      All I know is that unless Silver can regain/hold $32+ soon, the Silver chart looks like it wants to go to $17.26, back to prices of two summers ago, and a 786 retracement of the run from oct.2008 til april.2011
      Gold 1308 coming fast at ya too possibly.

      Good luck.

  8. 2 sources of info about miners -

    I would like to find some analysis of the miners, describing their yields - gpt (grams per ton), site-by-site if possible.

    Also to determine their (profit) sensitivity to energy prices.


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