Nearing the end of a major pull-back ?

Any major trend reversal never comes without any hick-up, questioning the reversal. Throughout the gold-miner bear market we have seen quite a few false recoveries, which were merely decent exit points allowing investors to mitigate their loss. In every occasion worse was to come. The major pull-back we faced in the second half of March is one of those key-events questioning the emerging trend. Anybody doubting the reversal should have sold by mid-March, the believers were and still are offered an opportunity to add to their positions.

Credit Suisse Global Investment Returns Yearbook 2014

Credit Suisse Global Investment Returns Yearbook 2014

This popular yearly publication goes in depth on three different questions puzzling many investors. It doesn't provide you with an easy unambiguous answer: there is no such one. Instead the statistical analysis gives you the insight necessary to recognize accepted misconceptions and false evidence. The "Credit Suisse Global Investment Returns Yearbook" 2014 is no longer available on the CS website. You can try the above sequence on a search engine to retrieve a copy on any other site.

Miners rally into second gear

The worst asset class of 2013 has metamorphosed into the high flyer of the first months of 2014. After a few weeks of hesitation, the gold miners rally gets into second gear. When evaluating miners relative to precious metals, the paradigm change is revealing itself. Throughout nearly the complete gold miner bear market, the main index for unhedged miners quoting on American exchanges (HUI) was losing ground relative to gold. Moreover it rarely even regained its declining 200 days moving average. The trend reversed and HUI/Gold now breaks above its 200 dma.

Miners reviving

Broad stock markets are hesitating after the December rally. Over the week Nasdaq holds on to a tiny gain but the S&P couldn't keep up. Precious metals seem to be floating with the tide: both gold and silver were retreating, but rally back on Friday to end the week up marginally. Gold ends at $1254, (+0.44% over the week) while silver closes at $20.32, (up 0.74%).

Over most of 2013, poor precious metal gains and broad stock markets hesitating, would have sent miners sliding. However a different mantra seems to have taken the lead. The HUI index added 3.47% over the week, making HUI/Gold appreciate to 0.173. Whereas this is hardly something to be proud on (comparing where we started 2013), it's definitely up since the December 2013 low. It's not that most miners suddenly have turned highly profitable, but rather that investors simply are fed up with the doom scenario.

Hui mining index relative to gold

A happy and prosperous 2014 to all readers.

Two gold miner bear markets compared

A very long term graph of the HUI gold miners index naturally goes together with a historic view of the gold price. The Yahoo data series for the HUI index starts off in 1996.

Anatomy of a gold miner bear market

Last two years, we've witnessed a plunge of precious metal prices from before Christmas leading to the New Year. The relentless gold bear raids from mid April onwards, lead to a multi year low for gold on June 28 and the following recovery completely was wiped out with gold equalling the June 28 low on Thursday Dec 19. It seems the gold bear has gotten ahead of itself.

Much the same accounts for the miners, which ceased to leverage down precious metal prices last week and were vigorously reviving, despite meager gains for the metals. Over the short trading week leading to Friday Dec 27, gold added a timid 0.86% on the Comex close to end at $1213.80, while -after its major plunge- silver added 3.43% closing at 20.08. The HUI index of major gold and silver miners added 4.23% with the HUI/Gold ratio now up to 0.1633, hovering above its decade low.

Gold price volatility: Real swing still to come...

The below graph shows the price of gold since the start of 2008, gold was about to break above $1000/oz for the first time in history. We all more or less remember what was to follow, but human memory is selective and often narrows down to the more recent events. Apart from the price of gold (in blue using the left axis), a second graph in red (using the right axis) shows an annualized measure of gold price volatility. It wants to tell a story...

Gold mining: the fading away of an industry...

The protracted downtrend of precious metal prices may have run its course, there is however no clear indication of much higher gold and silver prices in the near or medium term future.  Gold is moving sideways, unable to uphold $1400 for more than a few days.  Producers are scrutinizing their mining sites and not without reason. Production at mines with high total production costs may need to be scaled back.  Any new mining development will need to factor in lower gold prices going forward and the internal rate of return will be substantially lower.  Especially on sites where investment costs have been spiralling out of control, tough decisions may have to be made.  It should be clear that, under these circumstances, the global gold mining output will continue its decline, possibly at an accelerated pace.  Gold mining: the fading away of an industry...

Precious metals and miners make a U-turn

After grinding lower the first week of August, precious metals made a U-turn. The sentiment change sent the heavily depressed miners soaring. HUI/Gold made it to 0.20 last week and now stands at 0.195. (for fresh graphs, check the GoldMinerPulse page). While we could barely imagine any value below that 0.20 threshold until recently, we're glad the gloomy days are behind us (at least for a while). Last Friday gold peaked above $1400 intraday for the first time since early June.

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.