Miners will continue to disappoint

Last Friday we witnessed a magnificent miner rally as gold broke above $1300 for the first time since mid June 2018.  However, miners have been disappointing for most of the past 18 months. There is no obvious reason why this dire situation would suddenly improve. 

Precious metals mining in 2018: a dark cloud with a silver lining & 2019 outlook

Short 2018 mining review

Early last year we witnessed gold rallying rapidly to what was to be its 2018 high. Till about mid May, the yellow metal managed to uphold $1300. Miners however have mostly been lagging the advance of gold, with the HUI/Gold ratio in decline and bottoming early September, after gold made its low by mid August.

Diverging price trends among precious metals

Diverging price trends among precious metals

Precious metals in a downtrend over 2018 is a story of the more obvious. The failing gold rally early in the year and the breakdown of silver leading to a gold/silver ratio now over 86. Platinum is another horror story: longs were lured in a failing rally of this denser precious metal. Yet by mid August, platinum plunged to $767.  Even during the four year gold bear market, platinum had not seen such price level. Today (30 Nov), Platinum again is to close below $800/Oz, making the Gold/Platinum ratio rise to 1.533. Two ounces of gold now buy over three ounces of platinum. 

Miners once more lagging precious metals

The Randgold - Barrick merger lifted enthusiasm within the mining sector. As the metal turned up with gold breaking and holding above $1200/Oz (despite a rising USD and interest rates creeping up), miners seemed ready for a lengthy rally, especially after HUI/Gold completed an inverted head and shoulders pattern.

The HUI/Gold ratio: what's left in Pandora's box?

With the yellow metal stubbornly quoting below $1200/Oz, miners suffered badly. The HUI index is closing 2018 Q3 at 141.1. Earlier, n September 10, the HUI closed at a low of 134. We need to look back to early Feb 2016 to find a lower close.

Recovery rally doesn't cure the disease

Mid August, the HUI miner index plunged to 139: beneath both the Dec 12, 2017 bottom (175) and the Dec 15, 2016 bottom at 163.5. After Friday's rally HUI now posts at 146.8, which still is well below said bottoms. The recovery rally merely alleviates the pain but it doesn't cure the disease.

Platinum scalp at the shorter's belt

White precious metals lagging gold

Despite gold selling off last few weeks, the damage among "white precious metals" has been worse.

The gold sell-off was discussed last week, as the yellow metal was nearing its December 2017 low, which it eventually equalled on July 2nd.

Gold bottoming at the December 2017 low

Unlike after previous FED rate hikes, precious metals don't quickly bounce up but continue their losing strike. A stronger USD is only part of the story.

Prospectors & Developers Association of Canada (PDAC)

• What should we remember from the PDAC 2018?
• Why didn't I come up with this any sooner?

Ever heard of the PDAC curse? Quite often, mining stocks plunge right after the annual PDAC meeting mid March. The seasonal pattern of the gold price is not very favorable in that particular period of the year. Right after the Chinese new year in February, physical gold demand tends to slump.  You often hear Frank Holmes talk about gold in terms of 'The Love Trade'. Especially in the big Asian emerging economies, gold is appreciated as a wedding gift. This tradition is firmly underpinned by weak currencies and above average inflation. Early summer is when the interest in physical gold should return. Moreover the 2018 Ramadan ends mid June, sparking also demand in the Arab world.

Long term performance of Gold Miners

Previous few postings have warned against betting on leverage when investing in gold mining stocks. Miners occasionally outperform when gold rallies really get traction. They sometimes prove a decent investment when a substantial number of influential investors are convinced that the bottom is in for the gold price. However, miners more often lag the metal while it's rising or slide precipitously upon gold weakening.  The focus now shifts to statistics on individual miners: both success stories and horrendous nightmares.