Friday, 31 October 2014

Halloween gold slide

It 's not just pumpkins and scary masks. This time there are daggers hiding behind the cloaks and the blood on the streets is more than just tomato juice...
We may witness a $100 day for gold: adding variations from the previous close to the intraday minimum and back up to the intraday maximum and into the close.

Precious metals are in a tailspin ever since the FED's QE program has been wound down. The whole QE3 program has been extremely negative for precious metals:
At first we didn't witness more than an ephemeral and modest rally as QE-3 was intitiated.
The much touted tapering subsequently brought about the major 2013 slide. As QE-3 was effectively being wound down, precious metals responded more to what was happening on the world scene than to the decelerating expansion of the money supply.

A weak economic outlook in Europe and Japan and a much lower growth rate in Brazil and China contributed to the USD strengthening... and precious metals selling off.

However gold is not only sliding in USD, even corrected for the stronger green-back the plunge is almost as impressive:

In the mean time, miners are sliced and diced as though the current gold slide is to exacerbate, making gold mining an unprofitable business for ages to come ...

Measured in terms of the HUI gold miners index relative to gold (HUI/Gold), miners now are as cheap as before the secular gold rally (2000-2011) started. Back then, the yellow metal had been in a 20 year down trend, bottoming below $270/Oz. 
In absolute terms, the HUI miners index marks a low far beneath the latest gold market bottoms back in June and December 2013 as illustrated below on a graph with weekly observations, covering three years:

The accelerated sell-off leaves even seasoned investors in total despair.

1 comment:

  1. I got know useful information on USD here. Forex market is quite difficult for me to understand. I prefer trading in futures using stock futures tips of market advisors.