Is a turn-around ahead?

The dust around the US presidential elections wasn't settled yet and there was the news on a first vaccine by Pfizer, hitting the market on Nov 9.

The impact has been profound: all risk-off plays which had been pushed to lofty highs due to the Corona pandemic sold off, while despised airliners, hotel concerns, "brick& mortar" retailers and related REITS suddenly rallied tenths of percents.

You have all witnessed the side gold and silver were on. The nascent recovery, inspired by the Joe Biden victory, was brutally reversed. A near $100/oz drop of gold is indeed unheard off, though the damage was less severe by the close. Till Nov 20, the $1850 support for gold held up. Ever since the bottom seems out with $1800 broken to the downside last Friday. Today there seems to be no improvement at all with gold now quoting $1775.

HUI/Gold

Sometimes gold mining investors get this gut feeling that a turnaround is imminent. Mining shares then no longer leverage down the gold slide, but start stabilizing, ignoring further gold weakness or may even go against the grid. When evaluating the HUI/Gold ratio, this may be the case right now:

HUI (basket of unhedged gold stocks) relative to the bullion spot price; daily observations over 6 months (click to enlarge)

HUI/Gold peaked by end July, before Gold rose to its August ATH. Gold breaking above $2000 was met with disbelief, since HUI/Gold slid breaking below its rising 50 dma at that occasion. 

HUI/Gold put down a fourth (lower) peak on Nov 6, when a price  recovery seemed at hand. After the brutal reverse, the ratio broke both the 50 dma and the 200 dma to the downside. However last Tuesday (Nov 24)  the bottom seemed in, with a timid recovery now over three days, despite gold continuing its slide. 

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What about silver miners?

The Global-X Silver Miners ETF 'SIL' is the best known product in this tiny niche. We use to benchmark SIL against the silver price to check how miners are performing.

Global-X Silver Miners ETF, SIL relative to silver bullion; Daily observations over 6 months. Click to enlarge

Conclusions are similar: ever since the recovery peaked on Nov 6, a slide set in, bottoming last Wednesday (Nov 25) with a two day recovery now following, despite silver continuing to weaken.

What is even more remarkable is what happened during the first week of August, when silver miners started sliding as the metal rose to its $29 peak and 7 and a half year high. Good news was ignored as bad news ahead was being sensed. Now the opposite seems true.

Gut feelings of investors justified? Let us hope they won't lead us astray this time.