While gold is experiencing a bit of a bounce over at the Comex, the mining shares continue their disappearing act as the selling is just relentless. What concerns me is the technical posture of this index. It is running out of time for the month of November to improve the deterioration showing up on the intermediate and long term charts.
The index is currently sitting near its session low of 203.04. As things stand at this moment, it is on track for the WORST WEEKLY CLOSE since November 2008. That is FIVE YEARS. As painful as it is for me to say this, another way of stating this is that the index has surrendered every single bit of its gains it made over the last 5 years. We are now talking about the potential for the index, IF IT BREACHES 200, to move to levels last seen at the very inception of the first QE program. Five years of wasted opportunity cost
I have said it before and will say it again, those mining companies that did not hedge any expected production when the gold chart broke down technically and the trend reversed from bullish to bearish, have done their shareholders a HUGE DISSERVICE. They willingly took on price risk leaving themselves open to downside risk in the price of gold. Businesses should not be in the business of speculation - that is for speculators such as myself. What businesses should be doing is managing price risk and locking in profits when they are available. That is what hedging is all about and why mining companies should act no differently than any other responsible producer.
Sadly, they are now being punished by the market for this folly. Perhaps we will see an end to this bearish trend in gold in the not too distant future and that will save their bacon, but that is no way to operate in an environment in which money flows are coming out of the commodity sector in general in favor of the broader equity markets ( to the exclusion of the miners ).
Here is the price chart as things stand for the moment. Note on the long term monthly chart that every one of the major Fibonacci retracement levels of the entire decade long bull market rally has been violated to the downside. The last one left is near 185. If the index falls through psychological support at the 200 level and does not immediately recover, odds unfortunately favor a move down to that final level of 185.
"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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