Thai Guru's Gold und Silber ... (Informationen und Vermutungen)

    Zitat

    Es gibt Sekundär- und Primärminen. Bei Sekundäreminen handelt es sich um Minen in deren Fokus die Förderung von Zink,... liegt und Silber nur als Zusatz- oder Abfallprodukt entsteht. Im Gegensatz dazu werden Primärminen in erster Linie zur Silberproduktion eingesetzt.


    In der Regel ist die Produktion von Silber in Primärminen teurer als in Sekundärminen da in Sekundärminen quasi die Silberproduktion durch die Produktion der anderen Rohstoffe quersubventioniert wird.


    Ich kann mir nicht so recht vorstellen, daß das einen Silberkäufer groß interessiert, ob seine Silberbarren nun als Haupt- oder Nebenprodukt aus einer Mine gekommen sind - es ist und bleibt Silber mit einem Preis.
    Na ja, als Geschäftsmann kann man es natürlich versuchen: Psst, ich hab hier Sekundärsilber, kostet aber'n 10'er mehr :D
    Ich denke das der betreffende Absatz in dem Text entweder unglücklich formuliert oder nur Füllmaterial ist.


    Trotzdem Danke für Deine Antwort.


    Bei den derzeitigen Preis für Gold und Silber wird das eine spannende nächste Woche - wir werden sehen.


    Gruß,
    CheckPoint


    CheckPoint
    Es geht auch gar nicht darum, ob es den Käufer interessiert was er für Silber letztlich kauft. Es geht darum aus welcher Quelle der Markt derzeit versorgt wird -> Sekundärminen.
    Und wie ich den Marktkommentar von ProAurum verstehe, verknappt sich genau diese Sekundär-Versorgung. Damit verknappt sich der gesamte Silbermarkt, bis Primärminen die Produktion aufnehmen, weil der Silberpreis es ihnen erlaubt profitabl zu produzieren.


    Kurz: Dies ist ein Indiz, dass auf der Versorungsseite das billig produzierte Silber zu neige geht und die Versorung nur zu höheren Preisen ausgeweitet werden kann. Damit ist dies ein Indiz für weiter steigende Preise.


    Smartie

    November 5 – Gold $432.90 up $3.40 – Silver $7.47 up 12 cents


    What A Day!


    "How fortunate for governments that people do not think." Adolf Hitler


    What a day! The ultimate in aggravation quickly changed into joy. Gold was battered early, falling to $424.20, as traders responded to a surprisingly strong US jobs report. However, the dollar quickly reversed course and began to sink like a stone. Gold quickly followed suit by going the other way.


    Technically you won’t find many better days than today. Gold:


    *Went back to fill its gap it left yesterday, then turned around.
    *Gave us an outside key reversal to the upside.
    *Broke into 16-year new high ground and closed there.
    *Did so with little fanfare.
    *Left an enormous base below which can propel the price to much higher levels.


    Houston’s Dan Norcini was right on the money with some early Friday morning commentary:


    Hey Bill:
    The day is yet young but something is developing the importance of which cannot be underestimated.


    The dollar reacted upward with the release of the stunning jobs report (337,000 of which 160,000 construction jobs are hurricane related) which sent gold into a tailspin.


    Then something remarkable occurred. The dollar was immediately sold down, the euro rallied making new lifetime highs and gold rebounded running right into the critical $430-$432 resistance zone.


    The interpretation of this price action is as follows: the structural defects in the dollar, namely the huge current account, trade and budget deficits, have become the complete focus of the currency markets and it appears that the entire mind set has changed. Forex traders are no longer viewing interest rate hikes as reversing the downward trend in the dollar. The structurals are now dominating.


    If this holds, gold will go on to $450 and then $480 fairly soon.
    Dan


    The gold open interest rose sharply, up 12,752 contracts to 323,653, another record. The massive increase tells us how intense the efforts were to keep gold from doing what it did today.


    Fine looking gold charts:


    December gold
    http://futures.tradingcharts.com/chart/GD/C4


    Weekly gold
    http://futures.tradingcharts.com/chart/YG/W


    A highly regarded gold company CEO told GATA’s Ed Steer today that gold production is falling a meaningful amount all around the world. There is no way The Gold Cartel can keep gold at these price levels too much longer under these conditions. Demand is just too strong. We can see that via John Brimelow’s fine work.


    Gold broke through its triple top and should soar in the weeks and months ahead. What is astonishing to my colleagues is the lack of excitement and interest. Many of those who are interested are so because they want to go short. Many of the cycle people are all calling for a top here and the public could care less. This is very bullish from a contrarian standpoint. Funny! Gold makes 16-year highs and it is the contrarians who are bullish.


    The Café Sentiment Indicator is a 5. We are not even close to seeing any serious froth in the gold market.


    The COT report released after the close will have the shorts talking to themselves over the weekend. The large gold specs reduced their longs by 9,273 contracts and increased their shorts by 7,185. The commercials increased their longs by 2,971 and reduced their shorts by 10,610. The small specs went more SHORT by 3,506. How bullish is that!!!


    It is important to keep in mind that few investors in the world know what you know about the gold price rigging. Gold has been ARTIFICIALLY suppressed for many years, to the tune of hundreds of dollars per ounce. As The Gold Cartel goes down for the count, the price is going to rise faster and far higher than almost everyone out there can imagine. Cept you, of course.


    Silver put in a solid performance and closed on its highs. The open interest rose 3718 contacts to 119,014.


    The silver warehouse stocks fell 99,871 ounces and made a new low for the move.
    After trading sideways for 5 weeks, silver roared into new high ground and could accelerate from this level in a flash.


    Oil turned around late to close up 79 cents per barrel to $49.61.


    The dollar closed on its lows at 84.07, down .56 and the euro jumped .86 to 129.46. The dollar is way oversold technically, yet it keeps tanking. Gold bears are waiting for the dollar to correct and gold to be tagged. Yes, it could come at any time. However, a correction could also come with gold $460 bid. Today’s stunning reversal is indicative of building demand for gold. Until the cash market softens, corrections at these price levels are likely to be short-lived.


    December silver
    http://futures.tradingcharts.com/chart/SV/C4

    Die Börse ist wie ein Paternoster. Es ist ungefährlich,
    durch den Keller zu fahren.


    Man muss nur die Nerven bewahren !

    The John Brimelow Report


    Was the Election a financial watershed?


    Friday, November 05, 2004


    Indian ex-duty premiums: AM $7.49, PM $7.86, with world gold at $430.25 and $429. Very ample for legal imports. The rupee reached another 5-month high during the day, but settled back to virtually unchanged at the close. Expectations are that it will go higher. Foreign portfolio investment inflows are increasing. The world’s largest gold buyer is a firm bidder up to $430 at least. This must underpin the world price.


    Despite the firm yen and the lower oil price, TOCOM was a modest buyer again today. On volume equal to 17,866 Comex lots, open interest rose the equivalent of 2,030 NY to the equivalent of 105,803 Comex contracts. Mitsubishi’s statistics imply the public added 4 tonnes (1,286 Comex lots) to their long. The active contract closed up a yen and world gold was 35c above the NY close at the end. (NY yesterday traded 90,283 lots, a startling 39% above the estimate; open interest jumped an equally startling 12,752 contracts to 323,653. The latter number is a record, the former may be.)


    Exactly why interest is building in Japan is an interesting puzzle. The yen/gold chart is not especially exciting, and a strong yen is normally frightening to leveraged futures players. Oil is said to have kindled enthusiasm recently for precious metals in Japan, but obviously not in the past few days. Reuters once again reports the story:


    "TOCOM gold has also been supported by Japanese retail
    investors, who have been diversifying their assets into gold
    ahead of the end of a government guarantee on bank deposits, the
    so-called "payoff", next year, traders said."
    Given that there is a greater tendency to take delivery of futures contracts in Japan than in the US, this might be plausible. It fits with the upswing in bullion imports in the past few months. Every few years Japan exerts important influence in world gold. The last time was Q1 2002, when imports surged ahead of an (ultimately scrapped) abolition of deposit insurance. Perhaps gold’s friends are getting windfall help here.


    ScotiaMocatta’s account of yesterday is:


    "Gold started the New York session 428.20/428.70…The market held steady early in the session in generally quiet trading conditions. However, volatility soon picked up when aggressive New York dealer buying came into the market. The longstanding resistance at 430.50 was broken allowing gold to run to 432.75/433.25, the highest price since August 29, 1988. The highly anticipated technical follow through buying never materialized forcing locals to give up on their existing long positions. The metal backed off to the 430.00 area where it remained right up to the closing bell."


    However, reviewing the actual volume and open interest data makes clear that NY yesterday was a great deal more violent than ScotiaMocatta and the other bullion bank commentators suggest.
    Today, of course, has been more obviously dramatic, with a massive bear raid after the payroll data massacred in what might be the decisive encounter of this bull market. Estimated volume by 10 am was a steep 35,000 contacts. Gold’s technical achievement is considerable, and many will concur with the JP Morgan "Metals and Energy Strategist" comment today:


    "Gold prints a new high for the year, signalling the return of the bull trend from the 1999 lows. As such, we expect the market to stage sustainable rallies over the coming weeks/ months, with the initial medium term objectives at 461/464, and potentially 500"


    Normally, the appearance of huge volume and massive open interest increases is a sign of zenith. But observing the dollar’s swoon in NY this morning in response to normally bullish data – and indeed gold’s refusal to back off this afternoon after the OI data came out – the thought occurs that the ’04 election might be some kind of financial watershed.


    JB

    Die Börse ist wie ein Paternoster. Es ist ungefährlich,
    durch den Keller zu fahren.


    Man muss nur die Nerven bewahren !

    Einmal editiert, zuletzt von Schwabenpfeil ()

    CARTEL CAPITULATION WATCH


    The DOW keeps on rising. It gained 73 to 10,387 and the DOG rose 15 to 2039.


    04:41 China signals readiness to loosen yuan peg to dollar reports the WSJ
    Recently officials have added the need for flexibility to their statements on exchange rate stability though there has been no indication of when such a loosening might occur. One official said he thought the yuan could increase in value 7-10% without harming Chinese companies' competitiveness.
    * * * * *
    08:30 September payroll figures revised to +139K from +96K; Sept. unemployment rate unrevised at 5.4%
    * * * * *


    08:30 October nonfarm payrolls +337K vs. consensus +175K; unemployment rate 5.5% vs. consensus 5.4%
    * * * * *


    08:31 Oct. average hourly earnings reported 0.3% vs. consensus 0.3%; average weekly hours 33.8vs. 33.8
    Prior average hourly earnings revised to 0.1% from 0.2%. Average weekly hours unrevised at 33.8
    * * * *


    14:27 December WTI crude trading to highs of the session
    Reuters reports a militia leader in Nigeria's Niger Delta reported two militiamen were killed while unarmed on 11/3 in the country's oil industry hub Port Harcourt. The attack, the first reported since last September, has threatened the oil truce in the region, quoting a source as saying another few such incidents could damage the accord. The news has sparked some speculation of a potential strike in the region, causing the late-day rally in oil. Dec. WTI crude quoted last at $49.60, just off the $49.70 highs.
    Reference Link
    * * * * *


    14:24 AP reports that US embassy, nearby cafes in the Hague evacuated
    The reason for the evacuation wasn't immediately known; an AP reporter on the scene said a large area surrounding the embassy was cordoned off.
    * * * * *


    15:00 Sept. Consumer Credit reported +$9.8B vs. consensus $7B
    Prior reading revised to +$2.2B from ($2.4B).
    * * * * *

    Die Börse ist wie ein Paternoster. Es ist ungefährlich,
    durch den Keller zu fahren.


    Man muss nur die Nerven bewahren !

    From Jesse - See a correlation here?


    Chuck checks in:


    Just very busy installing a new computer and everything that goes with it. I assume that the strength in the stock markets is directly related to both oil's weakness and the Bush announcement that he will pursue allowing S.S. to go private. The last time he said this was at the beginning of his first term. I think that it is very informative that gold rose against weak oil.


    Bill, we can't be surprised about GSS since it has acted lousy anyway especially compared to WHT and BGO which I link with Golden Star. Now that the bad news is out of the way, we should see it stabilize and rise. It is like Durban which announced a big loss and made the bottom in the South Africans. If GSS gaps down tomorrow and then closes up, that will probably be it. I am going to buy some, if that occurs.


    Still, the opinions on gold even among the bulls appears to be muted. No great expectations. Given the continued lack of activity in the explorations, I still hold that this leg will be a shocker. We will have some speculative fervor before this leg is over, and it hasn't even started. The move should be very soon. Love.


    I am still astounded, in spite of the move in gold, the absolute in the exploration companies. Five of my holdings have not yet traded. My conclusion is that there is a deadly disbelief in the move and this is going to be a monster move. Bought some GSS just now, also. Everyone is still looking backwards and fears that gold is going back under $300. Pretty amazing….


    Almost all of the so-called gold pundits are looking for just a moderate rise for the foreseeable time with a time of consolidation here. That breeds complacency in actually moving to buy these stocks. Everyone remembers how they got burned in buying at the last top. Newmont is almost at its high and GG continues to perform well. I think we will have a buying panic soon. So many believers, so little conviction. Chuck


    GATA’s Chris Powell put this note out:


    GATA's great South African friend and a great advocate of gold and of South Africa itself, Peter George, has started a financial newsletter and Internet site, which can be found here:


    http://www.investmentindicators.com


    The site is worth checking simply for George's brief autobiography, a great read that mentions GATA.


    ***

    Die Börse ist wie ein Paternoster. Es ist ungefährlich,
    durch den Keller zu fahren.


    Man muss nur die Nerven bewahren !

    Invest In Doubles not Bubbles


    I think GATA is dancing all around the point I am going to try and make but sometimes it helps to put an idea in a little different perspective to bring it home. Stay with me as it really backs up what you are recommending to the community, it just puts some numbers and a little different concept on things. I agree with you absolutely that gold and gold shares represent a great investment opportunity and it is entirely possible for our gold shares to at least do a few doubles before it is all over. How many doubles no one really knows but surely $1,000oz or $2,000oz +/- gold will go a long way to enhancing our investment returns. If it is anything like the 1930 and 1980 experience we are in for a spiritual experience as Mr Sinclair would say.


    Take $.50 (cents) and double it 7 times: $1.00 $2.00 $4.00 $8.00 $16.00 $32.00 $64.00. In 1989 Microsoft was selling for $.50 and if you had bought Microsoft and held it to it highs in 2000 the $.50 purchase would have doubled 7 time to $64.00 +/- an all time high for Microsoft. The same thing with Dell if you had bought it in 1993 at $.50 a share it would have appreciated to $64.00 +/- an all time high. Several other NASDAQ stocks did the same thing so this is not new ground or crazy stuff, we are just recognizing a market phenomena that may help us stay focused on gold so that in the end we all can be very successful.


    Now take $1,000, $10,000, and $100,000 and double it 7 times:


    $1,000
    $2,000 $4,000 $8,000 $16,000 $32,000 $64,000


    $10,000
    $20,000 $40,000 $80,000 $160,000 $320,000 $640,000


    $100,000
    $200,000 $400,000 $800,000 $1,600,000 $3,200,000 $6,400,000


    I will take 7 doubles on my gold stocks or any part there of any day of the
    week.


    Maybe this will help. I say again, doubles not bubbles lead to real wealth. The trick is to find a situation that will gives you the doubles. The next important thing is to be there before the double happen not after the fact. We have a great opportunity to accumulate a nice stake in real wealth and your (Bill Murphy) contribution has been mighty. May I add that opportunities like what we have in gold come by very seldom in a life time. This is a gift. How many of us kick ourselves for missing MSFT or DELL, well here is another chance, don't be foolish. Don't let someone including yourself take you out of the game because you will invariably miss getting back in.


    I hope this helps our GATA family understand where the end zone is and keeps them from getting so herky jerky when things don't happen as fast as they want them to happen. MSFT and DELL had their ups and downs too, just take a look at their charts. It was not a smooth uneventful ride (how about 1987) where all you had to do was count your profits at the end of every day. Think of all the people that bailed out of MSFT & DELL because someone told them they needed to take profits or some other ill conceived idea. One last comment. Look at how gold stocks performed in the 30's and 80's and you will note that 7 doubles is not out of the question. This is the Super Bowl but as our leader Mr Murphy would say: "you GATA be there to win". But if you do jump ship, just remember you can always tell the grandchildren sitting on your knee how you almost landed the big one, so cheer up all will not be lost if you get out.


    W Bishop Jordan
    wbjordan@earthlink.net

    Die Börse ist wie ein Paternoster. Es ist ungefährlich,
    durch den Keller zu fahren.


    Man muss nur die Nerven bewahren !

    Gold makes 16-year highs and this is how CNBC covers it:


    Unbelievable! I watched CNBC a bunch of times today at the hour & half-hour where they did the market recap & market statistics. They talked about the S & P, Dow, Nasdaq, the volume, oil, etc. They DIDN'T even MENTION gold!! No charts, nothing. It closed above $430 and they didn't even say the world GOLD in the many hours I watched!! Or silver either!!!


    I thought $430 was the level we're all waiting for. Maybe they took the word gold out of the dictionary.
    Steven Cooper


    Can you imagine the stock market making 16-year highs with this sort of coverage?


    From Gold Investments in Ireland:


    Hi Bill,
    Very good jobs number and yet dollar drops and gold is up - precious metals look ready to begin the next phase of the bull market.


    Kitco Charts seem to keep going down whenever there is large moves to the upside or the downside.


    We have recently set up our own gold charts on http://www.gold.ie and will be adding more gold and silver charts in the coming weeks.


    If any members of the Cafe want an alternative gold chart , please check out ours.


    All the best,
    Mark

    Die Börse ist wie ein Paternoster. Es ist ungefährlich,
    durch den Keller zu fahren.


    Man muss nur die Nerven bewahren !

    An invitation from a Café member:


    I'd like to invite you over for dinner tonight! We're having stuffed Cartel! It will be delicious. This delicious meal will be accented with mashed Bullion Banks topped with our special Greenspan sauce that has been puréed through the blender. We maybe a little "short" on this delicious side dish as someone paniced and dumped a whole lot of it. It's made the cooks quite sick that they may be short. We have invited JP Morgan, Jessica Cross, Tim Wood and their friends to join us but we heard that they are really sick today and can not stomach to eat anything. Go figure with such a nice meal as this. After being denied their company we decided to invite Barrick, but they told us they are not feeling well either as they have had some serious financial problems that are getting worse by the day.


    We even have some exciting entertainment! The Goldman Sach's Band will be playing some Rhythm and Blues for us tonight! But they notified us that there will be more Blues than Rhythm. Their theme songs will be "Wasting away in Losersville" and "I'm a Dope on a Rope" . I know it sounds depressing, but it is really great fun for those of us who are watching.


    Hope you can make it. It will be the most delicious meal I've had all year!


    When the banquet is over, we have a special guest speaker. He will be speaking on the subject, "If I had only listened to Bill Murphy, I wouldn't have gone bankrupt."


    We promise a truly entertaining evening!
    Wendell Leytham

    Die Börse ist wie ein Paternoster. Es ist ungefährlich,
    durch den Keller zu fahren.


    Man muss nur die Nerven bewahren !

    On Golden Star Resources and the gold shares:


    bill
    Well, what a day! seems we/you finally seem to get where we have been aiming for so long.


    I read your lines this morning about the recent action in GSS shares and thought you and the GATA community might be interested in the following excerpt from the latest performance report of frank veneroso's "veneroso gold index certificate", issued by abn-amro bank of the netherlands and traded only on the frankfurt stock exchange.


    According to their value-oriented investment policy, frank and his team invest only in an number of gold juniors (alamos, x-cal, etruscan, canarc, bactech, bendigo) that sell at a significant discount relative to their NPV. despite his preference for juniors he wrote in that report that he included GSS as one of only two intermediate producers (the other being randgold resources) because he believes that the stock is now fairly valued:


    "we have selected GSS. it is now an intermediate issue. the acquisition shenanigans involving wheaton river, iamgold, GSS and coeur d'alene have brought arbritageurs into GSS's stock, depressing it slightly. GSS sells roughly at its NPV. its large land package in africa provides it with very considerable palpable blue sky. it meets our criteria."


    BTW, I believe that not only arbitrageurs but also other hedge funds pursuing a long/short strategy have found interest in GSS. not only is it one of the most volatile index components of the HUI, but it also surely has the most GATA followers as shareholders. it is a no brainer that most of us are 95% of the time fully invested or even on margin (as you have stated in last night's MIDAS when referring to samex's parallel dive with GSS) and therefore vulnerable to selling attacks. just look at yesterday's and today's volume!!


    Those who have held to the stock and bought some on dips for the last 3 years should have made healthy profits. every single time there was a sharp sell-off, it was soon followed by short-covering rallies, one of which I expect is just ahead of us. if you still have some cash on the sidelines, it's not too late to load the boat. I bought some at $ 4.30 today.

    Die Börse ist wie ein Paternoster. Es ist ungefährlich,
    durch den Keller zu fahren.


    Man muss nur die Nerven bewahren !

    Einmal editiert, zuletzt von Schwabenpfeil ()

    GO GATA, GO GOLD


    best wishes from Switzerland
    phil


    The gold shares were lackluster compared to what happened today in the gold pits. The HUI couldn't even take out 240, as it closed at 238.36, up only 4.64. The XAU gained 2.51 to 106.86.
    For years we have dreamed of the big breakaway gap with gold coming in sharply higher one morning and then running for the rest of the US trading session. If there ever was a day for one, it is this coming Monday. Today’s conclusive close above Thursday's high into 16-year high ground ought to usher in all sorts of new buying.


    GATA BE IN IT TO WIN IT!


    MIDAS


    Appendix


    Hi Bill,
    I agree with the well written e-mail in the Midas Commentary appendix today.


    You might never know how many people you and Chris have helped and how much money you have made for the good guys and their relatives and friends. Besides the value of the big picture, there are statements in you daily Midas Commentaries that are of VITAL importance to gold/silver investors that probably elude many readers. Some other people bitch about them. I hang on to these casual statements with my life and invest accordingly. You, Mike Bolser, your stalker contact and others have made statements that I print and keep in a package I call "current drivers" that are my most important tools for acting upon short term which also include some of Jim Sinclair's technical analysis. Chris adds to the long term fundamental picture.


    My commodity broker is in awe over my impeccable timing of buying and selling futures over the past year. Better yet, my commodity account boasts six figure profits and the game has hardly begun. I periodically remove some profits and buy physical to contribute to the motion of the cabal's demise. I hope you approve of that. : )


    You gentlemen have saved me bundles on the down side and made me a tidy sum on the up side. In addition, I am extremely well positioned in bullion, shares and some futures for the day gold/silver move much higher which I know must come.


    Thanks Bill, much appreciated! And a "thank you" to your GATA contributors who for the most part must feel like they are talking into a void. I assure them they are not.
    Ron Lutka

    Die Börse ist wie ein Paternoster. Es ist ungefährlich,
    durch den Keller zu fahren.


    Man muss nur die Nerven bewahren !

    Einmal editiert, zuletzt von Schwabenpfeil ()

    Trading the HUI/Gold Ratio



    With gold pushing shiny new 16-year highs this week, contrarian investors and speculators continue to earn dazzling profits in this young bull market. But even though gold’s mainstream notoriety continues to gradually increase during exciting weeks like these, it remains a very small sector in the grand scheme of the markets.



    As I discussed a couple weeks ago, actively trading an up-and-coming sector can be quite challenging. Young bull markets in traditionally overlooked sectors lack the amazing array of highly specialized trading indicators which the mainstream stock markets take for granted. As such, contrarians are constantly striving to create innovative tools to aid their trading decisions.



    In response to my thoughts on designing custom HUI-specific indicators carefully tailored for today’s gold-stock bull, I have been blessed with some fantastic feedback. I am very grateful as generous speculators, investors, and analysts from around the world have shared some outstanding ideas with me. I have learned a great deal so far thanks to these people graciously helping me expand my perspectives on trading indicators.



    One gentleman sent me a neat idea last weekend that led to this essay. He developed an innovative and elegant way to cull crystal-clear major intermediate trading signals out of analyzing the ongoing relationship between the HUI and gold. This really caught my attention since ratio analysis is becoming increasingly popular among contrarians these days.



    A ratio, which in market terms is one price series divided by another, provides an excellent way to precisely quantify the relative performance between two different market prices. When a ratio is created with price A as the numerator and price B as the denominator, the interrelationship between A and B is far easier to understand. The single A/B ratio graph is vastly more intuitive and easier to assimilate than the challenging exercise of trying to mentally combine two separate graphs of A and B to understand their relationship.



    With this A/B ratio example, if A is outperforming B the ratio will rise. But if A is lagging B, the ratio will fall. Thus the ratio distills and illustrates the relative performance differences over time between two separate price series. Ratios can reveal subtle trends in relationships that are difficult to detect when comparing two conventional price charts.



    The popularity of ratio analysis has exploded in the past five years or so. I suspect a key factor in this development is the emergence of powerful websites like http://www.StockCharts.com that enable traders to instantly and effortlessly create any kind of ratio they wish. By entering any two financial symbols in StockCharts.com separated by a colon, new ratios can be created as fast as one can think them up.



    One particular ratio that has long intrigued contrarians is the ratio of gold stocks to gold itself. During any major bull market in gold, there are times when gold stocks radically outperform gold during uplegs. Naturally these are the very times when investors and speculators want to be heavily long gold stocks. Conversely, there are also inevitably times when gold outperforms the gold stocks. While this can be due to gold rising faster than stocks, more often than not it is the result of gold stocks correcting far faster than gold. These are not good times to be long.



    Since today’s premier unhedged gold-stock index is the HUI, the gold-stock-to-gold ratio of choice today is the HUI/gold ratio. This is easy to pull up at StockCharts by typing in the symbol $HUI:$GOLD . While this ratio is discussed and debated almost constantly on Internet gold forums, I hadn’t yet seen a comprehensive and elegant way to trade it for major intermediate trends until last weekend.



    My friend and fellow analyst/financial commentator, Matthew Frailey, graciously shared a simple and brilliant approach to trading the HUI/gold ratio with me. Mr. Frailey runs http://www.BreakPointTrades.net where he shares comprehensive technical analysis and speculation signals with his subscribers. He publishes a weekly newsletter covering many sectors including gold as well as periodically contributes essays to gold portals. In addition, as a technician’s technician he is an adept chartist ranked high in the StockCharts.com Hall of Fame. If you love charts as much as I do, you owe it to yourself to check out his website.



    While pondering how to help his clients ride the same major intermediate trends in gold stocks that we chase, Mr. Frailey pointed out the following to me. “Rather than analyzing a chart of the HUI, I think a ratio between the HUI and gold metal is far more useful. Gold stocks tend to outperform or underperform gold metal at various times. Obviously, it is the times when gold stocks outperform the metal when you want to own gold stocks.”



    In order to discern these times when gold stocks are due to outperform gold in a major upleg, Mr. Frailey developed a great system that parses the undulating HUI/gold ratio to ferret out key buy and sell signals to ride major intermediate trends. By deftly combining linear resistance breakouts with 50-day moving average failures, his system throws out very clear signals that are unambiguous and easy to interpret. As an added bonus, these signals are easy to watch for in the future on a StockCharts.com $HUI:$GOLD ratio chart.



    Our three charts below detail this trading system, beginning with a bull-to-date HUI/gold ratio strategic view to outline the general thesis. After this, we zoom into the latest major upleg and correction in gold stocks in additional graphs to observe how the most recent HUI/gold ratio trading signals unfolded on a tactical level.

    Before we delve into how to trade it, the HUI/gold ratio itself is quite interesting. Notice above how this ratio systematically marches higher during our current secular bull market in gold and gold stocks. Powerful uplegs unfold as the HUI outperforms gold stocks. After these uplegs when the HUI and gold inevitably correct to take a healthy breather though, the ratio tends to consolidate, either grinding sideways or retreating. If you compare this ratio graph with a conventional HUI-only graph, of course the ratio uplegs precisely match the HUI uplegs’ timing.



    Now since this ratio reveals the relative performance of the HUI compared to gold, it offers deeper clarity in some senses than a HUI chart alone. While a HUI-only chart shows an effect, gold stocks leveraging a gold bull, this ratio chart illustrates the relationship between the cause (gold bull) and effect (gold-stock bull). This ends up filtering out some of the incessant noise that plagues HUI charts.



    For example, during every major post-upleg consolidation to date, late 2001, late 2002, and late 2003, the HUI appeared to carve double tops which spooked some players. Double tops tend to be bearish, since the standard interpretation is that a price is hitting major bull-to-date resistance for a second time but remains woefully unable to punch through.



    In the ratio chart shown above though, the HUI interim highs of mid-2001, mid-2002, and late 2003 are very unambiguous. The ratio topped and headed lower into the necessary correction without any technical lollygagging. No ratio double tops formed. Many intriguing comparisons like these become evident if you compare a HUI/gold ratio graph to a HUI-only graph. The ratio expressing the cause and effect as one seems to act as a filter to helpfully moderate the high noise levels inherent in the pure HUI data.



    Matthew Frailey’s elegant HUI/gold ratio trading system is drawn in above. A combination of the blue top resistance lines during consolidations and the white 50-day moving average during uplegs is used to define major buy and sell signals. If you look at the actual green and red buy and sell signals drawn on this chart, it is readily apparent that buy signals flash right as major uplegs launch while sell signals sound soon after these uplegs top. This system’s timing for gaming intermediate gold-stock trends is quite good.



    In order to define a HUI/gold ratio buy signal, the ratio must first decisively break out above its latest consolidation’s upper resistance line. In the past four years there have been three major consolidations with three resistance lines, all drawn above in blue. These resistance lines connect the latest bull-to-date ratio high with the inevitable subsequent descending highs as gold stocks correct after a major upleg.



    For months after a major interim top, the HUI/gold ratio struggles but continues to fail near the consolidation resistance. But, eventually, sooner or later sentiment waxes too negative so a major new upleg is due to erupt. The actual advent of this upleg, and the end of the preceding correction, is announced when the ratio finally musters the strength to blast up through and shatter the consolidation resistance lines.



    Such buy signals flashed in early 2002 and mid-2003 right on the door step of the two most powerful gold-stock uplegs in this bull to date. Investors and speculators alike would have done very well to throw long quality unhedged gold stocks as these buy signals triggered. Incidentally, the latest buy signal just flashed in August and suggests we are already in the early months of the next major gold-stock upleg today.



    Mr. Frailey defines sell signals as times in major uplegs where the HUI/gold ratio collapses back down below its 50-day moving average. During the uplegs the ratio’s 50dma tends to act as strong support until the upleg reaches maturity. But once a major upleg crests, soon after the event its 50dma fails as support. It is these very moments when the HUI/gold ratio decisively pierces through its 50dma to the downside when speculators should consider selling their gold stocks to ride out the coming correction.



    Three of these HUI/gold ratio sell signals are drawn in the graph above, each of which occurred after one of the major bull-to-date uplegs in the HUI. Any speculator who heeded these signals could have avoided 80% or so of the subsequent corrections following the major uplegs. Naturally this would put speculators way ahead in the capital game, since they could ride the uplegs but then deftly pull out their capital early in the corrections so they don’t suffer serious losses. Then this prudently preserved capital can be plowed right back in when the next buy signal triggers.



    So a HUI/gold ratio buy signal is triggered whenever the ratio decisively breaks out from a descending resistance line during a consolidation/correction. The subsequent sell signal then triggers when the ratio’s 50dma fails as primary support following a major upleg. Definitely simple, yet elegant and very effective so far in this gold bull to date!



    Now that you have seen the big strategic picture, these signals become even more clear when considered from a tactical perspective. In order to illustrate this, we zoomed in to consider last year’s massive upleg to show a buy signal and this year’s ugly correction to highlight a sell signal. The blue dashed squares in the strategic chart above show the zoomed in areas from which our next two tactical charts have sprung.

    Calendar 2003 was a phenomenal year for contrarians invested in gold stocks, and this ratio certainly shows it. Between March and early December, the HUI took off and vastly outperformed gold. This period of relative strength does a fantastic job of illustrating how to combine HUI/gold ratio buy and sell signals to ride a major upleg in gold stocks.



    The whole process begins during a consolidation following the last major upleg. During this time gold stocks, since they are leveraged paper, tend to fall farther and faster than gold. The relative underperformance of the gold stocks creates a downtrend in the HUI/gold ratio. This ratio grinds lower within the confines of this trend, periodically rallying but usually failing to break back above its descending resistance line. Until the ratio resistance breakout actually occurs, investors and speculators can bide their time while the correction fully runs its course.



    In March 2003 gold stocks bottomed as Washington prepared to invade Iraq. The HUI/gold ratio started trending higher from that point but didn’t break out until the beginning of June. While the HUI did rise between March and June, one thing I really like about this particular trading tool is it demands conservatism. Trying to catch falling knives, picking the exact HUI bottom, can be hazardous. Speculators can use other tools to attempt this if they wish, but investors don’t need to trouble themselves with this exercise.



    By patiently waiting for the HUI/gold ratio buy signal of the resistance breakout, investors increase their probabilities dramatically that they are not buying in until a major new upleg is already underway. Most of the false buy signals are weeded out waiting for the breakout so the gains should accrue fairly steadily if a buy is made once the signal is flashed. It probably won’t deliver an entire upleg into your lap, but the ratio will certainly alert you to the strongest 80% of one!



    After throwing long gold stocks at the buy signal, all investors have to do is watch the HUI/gold ratio relative to its major 50dma support. As shown in white above, the ratio tends to bounce at its 50dma during all minor pullbacks until the HUI upleg has reached maturity. Shortly after the intermediate top, the 50dma fails as the ratio plunges down through this support line. Once the 50dma is decisively broken, it is time to sell and wait for the next HUI/gold ratio buy signal.



    Now this sell signal will not be triggered at an exact top either, but this too is a very conservative approach. By waiting until the 50dma is decisively pierced, investors vastly decrease their odds of being whipsawed out early by a minor pullback within an ongoing upleg. Instead, a true 50dma support failure probably won’t transpire until a major correction is already underway. This sell signal helps investors and speculators stay in as long as possible during a major upleg, but then gets them out while a major correction remains young and mild. Avoiding 80% of major corrections is a great way to multiply capital!



    On a tactical level these signals are as easy to understand and apply as they sound. Buy on a ratio resistance breakout during a consolidation and sell on a ratio 50dma failure after a major upleg. Our final graph, covering October 2003 to September 2004, shows how well this elegant system works during major corrections.

    After topping in late 2003, the HUI entered a brutal correction in early 2004. The HUI/gold ratio declined because gold outperformed the HUI in the initial months of this correction and then gold sunk far less rapidly than the HUI in the correction’s late capitulation stages last spring. This traumatic event is recent enough to remain seared in the memories of contrarians, so it is perfect to illustrate the HUI/gold ratio signals during a major correction.



    After a major interim top is carved, at some point in the subsequent weeks or months the HUI/gold ratio’s 50dma fails as support. This failure, which happened in December 2003, acts as a sell signal to warn speculators of an impending correction. In this latest example, the HUI was trading near 240 when this alarm signaled but only 170 at its May bottom, so heeding the sell in December would have saved speculators 29% in additional losses, not bad at all!



    After the 50dma-failure sell signal triggers, the ratio starts grinding lower in general although this decline is punctuated with periodic relief rallies. After a couple of these relief rallies are burned into the charts, traders can start plotting a ratio resistance line like the one shown above. As this line is gradually defined over the correction months, it creates a reference point from which traders can watch for the first decisive breakout.



    As long as this resistance line holds, no buy signal is triggered and odds are the HUI remains in consolidation/correction mode. As you can see above, the resistance tends to repel the periodic ratio advances and keeps the downtrend intact. But once a decisive breakout occurs, as in August 2004, then a buy signal is triggered and it is time to throw long again in anticipation of a major new gold-stock upleg.



    Once again the conservative nature of this indicator really shines through. Using relativity tools, I went long our current upleg in April and May, which really was the interim bottom. Yet, even though the absolute bottom was indeed in May, the HUI still sputtered along and consolidated for several more months. This summer, which was psychologically grating for gold-stock investors and speculators, could have been avoided all together with this ratio indicator.



    Conservatively this ratio breakout didn’t occur until August, after the entire consolidation had fully run its course. While its buy signal wasn’t triggered at the exact bottom near HUI 170, it did trigger around HUI 185 in August and therefore would have saved folks from enduring this summer’s long demoralizing sideways grind. Once again, especially for risk-averse investors, it pays to err on the side of caution and wait until a new upleg is already underway rather than trying to catch falling knives.



    The bottom line is Matthew Frailey’s simple and elegant technical system to wring clear buy and sell signals out of the HUI/gold ratio is an excellent addition to any investor’s or speculator’s trading toolbox. Whether you use it as a conservative primary indicator as an investor or a secondary confirmation indicator as a speculator, it helps filter out the HUI noise to identify major intermediate trend changes early.



    I am looking forward to observing this indicator myself as this awesome gold and gold-stock bull continues to unfold in the future. We will use it at Zeal to illuminate the HUI from a different perspective and provide confirmation for our other technical tools. It ought to help us continue to recommend superior gold stock and gold-stock options trades for our newsletter subscribers.



    The better we can use technicals to illuminate the prevailing trends, the higher the probability we can detect major tradable trend changes early when they are still highly profitable to trade. As Mr. Frailey pointed out to me, the best time to own gold stocks is when they are due to far outperform gold in a major upleg.



    Since the HUI/gold ratio quantifies the relative performance of gold stocks to gold, it provides vital clues of newly developing intermediate trends not readily evident in the HUI alone. And this neat HUI/gold ratio technical trading system defines simple rules to help capitalize on these new trends while they still remain young and promising.



    Adam Hamilton, CPA

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