The Big Picture – HUI Mining Index
The HUI mining index is in a bull market. Traders are making the mistake of stopping out at corrections, such as we are having now. I expect that in 12-24 months the HUI mining index will retest its all-time highs.
Like our new Facebook page to stay current on all things Smart Money Tracker
Gary,
I’m fairly new to your program.
I wait for the portfolio updates and trade…
It seems that you have to spend a trememdous amount of your time re-educating and re-assuring your readers.
Maybe I’m wrong, but I pay for your guidance and then follow it.
You have the patience of Jobe…
Thanks for your help…
I have been saying Gold mining stocks will under perform as soon as oil starts to make a comeback and apparently this is exactly what happened the last time.
http://news.goldseek.com/SpeculativeInvestor/1305007740.php
Below is a chart comparison of the Barrons Gold Mining Index (BGMI) and the US$ gold price covering the period from 1974 through to 1984. In other words, this chart captures the final 6 years of the secular bull market that ended in 1980 and the first few years of the secular bear market that would ultimately continue until 1999-2001. Note that the BGMI portion of the chart has a linear scale whereas the gold portion of the chart has a log scale.
The chart shows that:
1. Major corrections in gold stocks and gold bullion ended during the second half of 1976. As an aside, these corrections unfolded in parallel with an economic rebound.
2. The BGMI traded sideways for about two years beginning in early 1977, despite the fact that gold bullion was in a strong upward trend throughout this period. As a result, in late 1978 the BGMI was still about 50% below its 1974 peak even though gold bullion had returned to its 1974 peak.
3. Although the BGMI finally began to trend upward in 1979, its weakness relative to gold bullion became even more pronounced due to gold’s dramatic upward acceleration.
4. When gold bullion peaked at $800-$850 in January of 1980, the BGMI was no higher than it was in 1974. This means that the BGMI did no better than ‘tread water’ over a multi-year period during which the gold price quadrupled.
5. The BGMI and gold bullion pulled back sharply from their January-1980 peaks into April of that year, at which time the gold sector of the stock market commenced a spectacular 6-month advance that would take the BGMI to almost double its January-1980 peak even though the gold price remained well below the high made early in the year. That is, there was massive strength in the mining stocks relative to the bullion during the months AFTER the bullion had reached its ultimate peak.
6. The BGMI and gold bullion commenced long-term bear markets in October of 1980.
As to why the major gold mining stocks (as represented by the BGMI) fared so poorly relative to gold bullion during the huge 1977-1980 rally in the gold price, we can only surmise. We suspect that it was due to a combination of the following factors:
a) Increasing mining costs.
b) A failure to generate substantial increases in free cash flow due to the cost of replenishing in-ground reserves.
c) Rising interest rates.
d) Widespread belief that the rise in the gold price and the resultant increase in gold mining profitability would prove to be unsustainable.
e) The political risk associated with mining in some parts of the world.
And here is the best part, back then Gold stocks were the only viable alternative to Gold unless you wanted to store it.
Now we have ETFs, ETNs, Bullion storage in Switzerland, Gold bullion mutual funds and and Gold money.
These junk stocks will never cross their previous high.
Another one who will be standing here with egg all over his face as the train leaves the station with out you. Anyone who preaches the “. Never speech ” as I’ve seen many time over my 20 year trading career has always been wrong the majority of the time.
“20 year trading career”…that might explain why you missed the reference to the BGMI index over 40 years back.
This is what actually happened.
Large Cap Gold stocks severely underperformed Gold over the greatest bull market in Gold.
Yet people are surprised when it is happening again.
Here is a sentence for you to analyze 🙂
The present bull market in Gold stocks will NEVER be like the past :).
Here’s a sentence for you to analyze stupid , your copy and paste job is boring … Gary ban this quack .
You have a problem dealing with the truth or an alternate opinion. Gary does not.
As long as it is done respectfully.
We will check again in 1 year.
That was not an opinion that was a copy and paste job, and at the end you stated a FACT ie: miners will not hit their former highs … know the difference. An opinion is in your OWN words, and that’s the truth… Jr..
Sorry if you have hard time distinguishing between a fact and an opinion.
Anyone saying anything about the future is expressing an opinion. Whether they say it or not as no one knows what is going to happen.
As for the Copy and paste job, feel free to ignore it.
I felt it was a perfect summary of the last bull market where Gold stocks did really poorly. Something to keep in mind when they underperformed during the best of times for Gold.
Relax folks, this will turn around soon. A healthy correction, many high quality miners has retraced 61.8%. I’ve taken the opportunity to sell my high risk penny stox and bought quality miners instead.
I Think miners will lead the metal and the metal will turn to the upside mid October.
Common stocks, I don’t know, the big strong cycles is pointing downward. In the end central banks will be forced to just give up.
Seems like everyone is bearish on gold right now. Can they all be right, or is it time to take a contrarian stance?
The dollar is 19 weeks into its intermediate cycle and we are heading into an FOMC meeting where the Fed will balk again pushing out the next possible rate hike to December. They will have gone an entire year without a second hike.
It seems to me this is the likely trigger event to push the dollar down into its intermediate cycle low between now and December.
I don’t understand the bearishness, gold is holding up pretty good at a relative high level.
Gary you pain everyone with the same brush.
Just to be clear I think Gold will eventually surpass our recent high. Just not in the next 12 months.
Duck-
All good points, but with all due respect, today’s situation is A LOT different than 20-30 years ago.
Back then there was no EU, JCB forcing negative rates, governments were not drowning in debts, money managers were not scrambling for yields, countries were not socially/economically divided like they are now. This is a horse of a different color. I’m afraid but you’re the one who’s painting with the same brush – giving few bullet points from past price action does not seem compelling,, at least not me. Good luck with trading.
Thanks Calijoe.
Good points from you as well.
From my perspective, things are very similar.
Today rates are very low and inflation is 2-3% so real rates are negative 3-4%.
Back then inflation was very high but rates were 3-4% below inflation.
What is the problem?…WHEN gold makes a move up towards 240-250 (HUI) I will nail it! Not now when the bottom is unknown. Besides if it goes to 500…buy it at 240 seems a good deal, still, without much pain, right? In other words I am waiting gold comes to me and invites me to “dance” with!
Every analyst is bearish right now. What are the odds they will all be right?
If I focus on the weekly charts instead of the daily it just looks like gold is flagging above the 200 WMA and the 200 might be acting as support for the HUI.
Gary makes sense to me although I would rather be in gold and sliver than the large cap miners. Also, if gold is eventually going to make new all time highs, the penny stocks will give a much bigger bang for one’s dollar. I have done very well in the pennies this year and I think it’s noteworthy that they have not backed off much while the majors have been correcting.
it is true the articles I have read all suggestive of lower prices to come, whether the miners or the metals itself.. indeed bearish sentiment.
Gold, Silver, gold mining stocks and silver mining stocks could rally Monday, Tuesday into Wednesday knowing the Fed will not raise rates.
This could catch alot of people napping waiting on 2:00pm Wednesday because the train will have already left the station.
Hmm, indeed. It is a very interesting and also a possible scenario.
That would be a big surprise, Dreamer.
Looks like Rambus is bearish now too?
https://rambus1.com/2016/09/16/sil-update-28/
Any bullish (non perma bull) analysts out there?
Gary and Michael Oliver are bullish right now. Gary and Michael Oliver were also bullish at the bottom in Dec/Jan.
interesting observations