Wednesday, 7 August 2013

Brutal end of a nascent gold miner recovery

We 've witnessed a nascent precious metal miner recovery since June 27, as miners have started recovering even before gold found its final bottom below $1200 in the morning of June 28. For as long as the stealth gold rally had legs, miners responded favorably. The gold rally was petering out the week after last posting:
The stealth gold recovery rally. Gold has been sliding from July 29 onwards. Despite a small technical recovery last Friday, the gold slide aggravates. Whenever there is some rumor out about "tapering" the QE3/QE4 bond purchase programs of the FED, hell breaks loose.

Especially during the 'summer dolldrums' only little 'spinning the news' is needed to reverse a nascent gold recovery. The same favorable macro economic data that initiated the "tapering rumors" pushed American stock markets to new highs. As a technical correction sets in, gold no longer correlates in reverse to stock markets, but now "sympathizes lower".

All of this brings about a brutal end of the nascent gold miner recovery. After bottoming out barely above 200, the HUI index of unhedged gold miners rallied 25% to peak above 260 on July 23. August brought a lot of hardship with the HUI index now back down to 218.6 after the opening on August 7.

NYSE Arca HUI index of unhedged gold miners. Daily observations over 6 months till Aug. 07
Investors having stepped as the initial uptrend became clear in the second week of July are massively abandoning ship, aiming to cut their loss rather than to weather out the storm. Relative to the gold price, the HUI index already is back near its June 26 low:

HUI index relative to gold bullion.  Daily observations over 6 months till Aug. 06
Both absolute as relative to gold, the HUI index only briefly quoted above its 50 days moving average having flattened out. The ever declining 200 dma remains far out of reach. It's all back to square 1...

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