Precious Metal Mining ETFs: a benchmark

The 2013 cyclical gold bear market and the crash of precious metal mining stocks leaves investors shattered. Some have been lured in again during the early 2014 recovery, while others are waiting to get their toes wet. A few mining analysts left the scene, while many saw their audience dwindle. Investors with limited funds and/or time for a due diligence study may gain exposure to the precious metal mining sector through purchasing one of the exchange traded funds (ETF's).

Relative strength of gold prices

There are plenty of technical indicators working very well for a short time frames: RSI, MACD ...
However when it comes to determining the relative strength over the long haul of the gold price, or that of any other precious metal or commodity, it is more useful to compare to the average of the preceding period. In the following article, a simple moving average over 250 days is chosen, since that generally coincides with the number of trading days in a year.
Graphs last updated on Oct 21, 2016

Their last trump card...

The current circumstances in the precious metals markets are remarkably similar to those on June 27 and 28 of 2013.

1. Gold put down a new low since the 2014 recovery faltered. But the yellow metal is cutting its intraday loss towards the close.
2. Gold is playing it solo: though platinum group metals followed in the plunge, their recovery was swift and Palladium reversed to the positive, while platinum is breaking even by 4 pm and seems to evolve to a positive close.
3. Silver reluctantly follows gold, but never was down more than a couple of cents.

Failure of a rigging scheme (?)

The majority of traders in precious metals futures probably aren't the geniuses the outside world takes them for. They do have more and better market information and statistics and consistently apply those sources of information, with the algorithms implemented on their trading platforms. They continue adding to their personal -or their company's- profits until proven wrong.

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.