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When precious metals rise for the wrong reason ...

Tuesday, October 31, 2023 10:03

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Halloween is a moment to look back at the month of October ending. Gold plunged into October, putting down a bottom at $1820.2/oz on 5 Oct. The cruel invasion of Hamas terrorists into Israel on Sat. Oct 7 sparked the reversal. The yellow metal gained $100/Oz during the following week. On Friday 27 Oct gold once more broke above the psychologic $2000/oz.

Gold year-to date (daily candlestick observations), 50 dma and 200 dma. Underneath an MACD technical indicator.

As gold bottomed early October, the metal was strongly oversold. Yet this is not the first time the yellow metal broke above $2000 in 2023. We had two peaks before: in April and early May. The rally in March and April also followed a strongly oversold gold market with a double bottom below $1820 late Feb and early Mar.

When precious metals rise for the wrong reason, miners lag

The year-to-date graph of the HUI gold miners index shows a quite different profile:

HUI index year-to date (daily candlestick observations), 50 dma and 200 dma. Underneath an MACD technical indicator.

Currently miners are not at all impressed by the gold rally to $2000. The HUI miners index did gain during the initial rally, but lingered on as gold steamed up towards $2000. In a longer perspective, HUI failed to break even over the year despite the metal now posting a net gain of 10%.

The HUI/Gold graph, which is included on the Gold Miner Pulse page clearly illustrates miners lagging:

Gold year-to date (daily candlestick observations), 50 dma and 200 dma. Underneath an MACD technical indicator.

HUI index to Gold (year-to date, daily candlestick observations), 50 dma and 200 dma. Underneath an MACD technical indicator.

The HUI to Gold ratio is gradually losing ground over the year 2023. The ratio peaks early January with Gold surpassing $1930. The plunge to early March is deep as the yellow metal gives back much of its Dec 2022 and Jan 2023 gains. It nevertheless holds above $1800. After the March to April gold rally, reflected by miners an lengthy downturn sets in. As gold plunges to its early Oct low of $1820 a lower minimum is set. Whereas the following rally is initially mirrored by miners, the second half of October has been quite underwhelming.

Source: https://gwyde.blogspot.com/2023/10/when-precious-metals-rise-for-wrong.html

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