Gold miner pulse - October 2020 update
Where are we today? (relative to the May 2019 trough and the 2020 highs)
Last
|
Up_Min
|
Min
|
Max
|
Down_max
|
Relative Strength
|
||
Gold
|
1930.5
|
52.0%
|
1,270.4
|
2,063.7 |
-6.4%
|
83.3%
|
on date:
|
HUI
|
340.2
|
130.5%
|
147.6
|
363.9
|
-6.5%
|
89.0%
|
Oct 9, 2020
|
Narrative
|
HUI/Gold ended 2019 on a high, but gold rising because of political tension upon the elimination of Qassem Suleimani did not inspire miners. HUI/Gold slid to and broke below its 50 dma. The Vancouver Resource Investment Conference didn’t inspire any recovery either. The yellow metal convincingly breaking above $1600 curbed the trend but the Corona virus frenzy slashed miners and precious metals. HUI/Gold plunged both beneath the 50 dma and the 200 dma. The surprise 50 bp FED rate cut launched gold higher again with miners briefly bouncing despite a tepid stock market response.
|
The HUI/Gold regression: a linear but non-proportional relationship between HUI and Gold puts HUI/Gold (or for that purpose Gold/XAU) as valuation parameter in a different perspective. The HUI index has been calculated since 1996.
The mid to long term perspective
|
Last few weeks
SIL/Silver slid in disbelief after the silver price rallied nearing $30/Oz. Now, this ratio started recovering, despite volatility of the metals, with silver taking a pretty nasty dive after Sep 21. Miners respond tepidly to the silver rally on Friday 9 Oct.
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Previous longer term review has been posted end December 2019: Precious metal and miner 2019 overview and outlook for 2020.
The Nov and Dec 2019 slide of precious metals -with silver back below $17- didn’t bring about a collapse of miners. Silver miners prove exceptionally resilient. As silver was nearing $17/Oz again, SIL/Silver remained well above its 200 dma, with the 50 dma having put a golden cross. After some hesitation silver miners again propelled higher as the metal kept firming. SIL/silver peaked on Dec 30, 2019. Silver miners retreated with the broad market, despite metals firming ‘for the wrong reason’ (violence in Iraq and political tension). SIL/silver slid below its 50 dma. Investors were disappointed that silver again kept lagging gold, with the Au/Ag ratio again in excess of 86. The Vancouver Resource Investment Conference didn’t lead to any recovery either. Silver regaining $18 brought some improvement but the Corona virus frenzy slashed both miners and precious metals.
Who was to predict silver to slide from $18.60 to $11.65 on less than four weeks time? The abrupt slide aggravated after mid March. Silver miners imploded, reaching bear market valuation as is shown on the year-to-date graph. However as silver plunged beneath $12, miners shrugged off the extreme bearish stance and recovered with the general bear market bounce.
Global-X Silver Miners ETF, SIL relative to silver bullion; Daily observations year-to-date. Click to enlarge |
Global-X Silver Miners ETF, SIL relative to silver bullion; Weekly observations from Jan 2018 till now. Click to enlarge |
How gold miners are performing is shown by the capitalization weighed gold miners index of stocks included in the Gold Miner Pulse database (yellow diamond symbols). Note that most quotes are in CAD, which has been fluctuating to the USD. The blue graph shows the GMP silver miners index. The long term depreciation of the loonie mitigated the miner loss during gold miner bear market.
The silver mining index was the first to break above parity, despite silver about flat from where we started close to 10 years ago.
GMP list based (and capitalization weighed) gold (yellow dots), silver (blue) and equal weight (red) miners indices. Reference 1000 on Nov 19, 2010 (click to enlarge) |
The silver miners index rose till 1400 in April 2011, peaking three weeks earlier than did the silver price. The silver miners index also posted a higher maximum during both the March 2014 and June to early August recovery than it did in the August 2013 recovery. The gold miners index and the equal weight index did not peak higher at any of the failing 2014-15 recoveries than they did in August 2013. By January 2016 silver miners nearly completely lost their edge relative to gold miners, yet the recovery proved more vigorous. The below long term graph covers over three years: the end of the bear market with miners bottoming by Dec 2015, the 2016 boom-bust over the tedious months early 2018, with miners unable to match gold strengthening. Miner quotes were jittery after gold plunged below $1200. Towards end 2018 gold strengthened to $1280 with miners recovering timidly. As gold broke above its trading range late spring 2019, miners started rallying. The 2016 miners boom euphoria didn’t however repeat.
All 2016 data were dropped providing better detail on the mid/long term graph henceforth:
There is an important performance disparity among the gold and silver miners of the GMP database. Several laggards seem moribund. The median (or middle) miner (with an equal number better and worse) is losing 19.1%: still way below break even. The average is posting a 22.3% profit. The performance distribution is slanted towards the high gains.
GMP Miners sorted by loss to gain since inception on Nov 19, 2010. Note that the top 12 miners are left out to avoid excessive scale expansion Click to enlarge |
GMP elite miners, sorted by gain since starting observations in Nov 2010 using a logarithmic view with ticks 100% apart - Click to enlarge |
The contributor driven explorer and (junior) mining spreadsheet
- Miners relative to precious metals: a tactical approach; (July 2, 2012)
- Miners relative to precious metals: An update on 2012; (Jan 13, 2013)
- Anatomy of a gold miner bear market (Dec 30, 2013)
- Three year slide of precious metal miners (Dec 31, 2014)
- Gold miner bear market starting its fifth year (Jan 3, 2016)
- Precious metal miners relative to metal prices (Dec 31, 2016)
- Precious metal mining in 2018: a dark cloud with a silver lining and 2019 outlook (29 Dec 2018)
- Gold Miner Pulse 2019 (half-year update) (Jul 1, 2019)
- Precious metal and miner 2019 overview and outlook for 2020. (Dec 31, 2019)
During 2011-15 and even over the long haul, the relative performance of mining majors to the precious metals they produce was disappointing for major gold miners, even while the metals were in a solid uptrend. See: Gold miners: three decades for naught or Decades of underperformance
Source: https://gwyde.blogspot.com/2020/10/gold-miner-pulse-october-2020-update.html
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