November 19, 2013 at 10:41 AM EST
Gold, Silver and The Mining Sector Have Not Bottomed Yet
NYSEARCA:GLD, NYSEARCA:SLV, NYSEARCA:IAU, NYSEARCA:SGOL, NYSEARCA:UGL Related posts: Has Gold and Silver Bottomed? Have Gold Stocks Bottomed Out? Mining Sector Signaling An Excellent Entry Point Silver and Mining Stocks; Resistance Has Been Reached This Tiny Mining Sector Is About to Soar

bear and bull 8Bob Kirtley: As a bull on both gold and silver I do expect that this sector will shine once again, hopefully in the not too distant future. However we are still of the opinion that this gold bull market remains in a bear phase for now. The timing of market directional changes is critical to the success of any investment. We all know that it is impossible to pick the very top or the very bottom of the market and so enter and exit the market with absolute perfection. That just does not happen, but it is incumbent on us to try and get as close as possible to these turning points in order to maximise our profits.

The June low for gold prices is widely believed to the bottom for gold and hence it is considered to be the very turning point that we need in order to trade with a high level of confidence.

Gold is trading around $100/oz above those lows, silver is about $2.00/oz above its low point and the mining sector as evidenced by the Gold Bugs Index, the HUI, is sitting about 40 points higher than it was back then.

So why the trepidation and unease about the current situation – well we will try and lay out some of the issues that concern us below and would ask that you add your opinion to this debate especially if you disagree with our premise.

If we can get a handle on the big picture then we will have set the stage for some profitable trading, if we get the big picture wrong then all the detailed analyses that flows from it will have been a complete waste of time, effort and capital.

Gold and Silver

Since the heady days when gold hit $1900/oz it has lost some of its luster, correcting by more than one third to trade at $1200/oz in June 2013. At this point a summer rally began; taking gold prices as high as $1420/oz in August 2013. Silver joined in the fun and followed gold to higher ground, as did the miners, although with a tad less enthusiasm. This was an unusual move in that the precious metals sector generally suffers from the summer doldrums and so it raised hopes for the fall which as seasons go, is one the best for gold prices. Since August gold has tried to rally but each time the rally has petered out. We are now well into the ‘fall’ season and it doesn’t look so good for gold prices.

The HUI

The performance of the mining sector is predicated on the performance of the underlying asset and once all the costs of have been covered these stocks can move in leaps and bounds on the back of higher metals prices. The summer rally from 205 to 280 generated great excitement as it had the appearance of a new dawn. Alas, as gold and silver drifted lower so the miners followed with the HUI now down to 226. The chart below depicts just what a torrid time the miners have been through and the summer rally looks more like it is flat lining rather than making substantive progress. A re-test of the June lows looks to be on the cards and should support fail to hold then it’s a case of look out below.

HUI chart 2012 2013 price

Conclusion

There are many positive factors that we can look to as being supportive of precious metals such as; mints running out of product, China buying by the boat load, the printing and debasement of paper currency, the dwindling supply, the increase in premiums for physical gold, etc. As logical and sensible as these arguments are the fact remains that gold and silver are not setting the world on fire with their performance.

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Related posts:

  1. Has Gold and Silver Bottomed?
  2. Have Gold Stocks Bottomed Out?
  3. Mining Sector Signaling An Excellent Entry Point
  4. Silver and Mining Stocks; Resistance Has Been Reached
  5. This Tiny Mining Sector Is About to Soar

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