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The July Miner crash

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 International tension culminating in the outbreak of the Ukraine war, caused precious metals to spike by end February and the beginning of March. The hesitant first rate FED hike didn’t really alter the outlook for the yellow metal. With the benefit of hindsight this was a peak level, hence an ideal exit moment.

Miners followed suit and even withstood the initial gold retreat from its $2000 peak rather well. However, what followed since mid April got from ugly to cumbersome, culminating in scary and frightening. Let’s get the HUI graph since the start of 2022 right away.

HUI gold miner index, 2022 year-to-date

Miners started strengthening during February, with a carry through into March. The trend remained in place until Mid April. The trend reversal seemed a mere correction as the HUI held at about the level it reached late February, right before the outbreak of the Ukraine war. Even the May plunge only brought the HUI index back near its 2022 year-to-date low it had market in January. 

The scary and frightening section only started by mid June, lasting until July 25 when the HUI plunged below 200. For the record: a level of 200 for the HUI was attained early June 1996 with gold at $389, in Aug 2004 with gold at $406 and a few times more during those years. On their plunge into the abyss in October 2008, the HUI last closed above 200 with gold at $772. The recovery followed swiftly with the HUI breaking above 200 for gold recovering to $774.5. The 2012-2015 Gold and Miner Bear market brought the HUI back to 200 in Dec 2013 but with gold now at $1237. Fast forward to March 2020 when the Corona scare hit the markets with the HUI briefly plunging beneath 200 again, with gold now at $1636 as the HUI emerged to reach 200 again. On July 27 the HUI made it again above 200 after a brief dip below this critical level. Gold closed at $1734.8 on Comex that very day.

How about gold YTD over 2022?

Gold, Year-to-date in USD/Oz 

Before drawing any conclusions, just consider the scale: $1675 – $2075: about a 20% range top to bottom. Gold never got more than 20% beneath its 2022 peak. Moreover, the yellow metal was never down more than 8% on the year. Moreover the current recovery is more convincing than the upward blip we notice for miners. 

On July 25, the HUI index closed down 25% over 2022. The story telling about leverage of miners to gold has fooled generations of investors. Ever higher gold prices are needed for the HUI miners index to reach the same level. This ought to be an eye opener. The asset category of precious metal miners should be regarded as tactical speculation tools, not as suitable long term investments.
I would like to conclude with one more graph: HUI/Gold. Dividing the two should ‘filter away’ the gold price influence on the HUI. Ideally we should obtain a graph with little net variation. Reality proves different:
HUI gold miners index, relative to gold. Daily observations over the last six months.

Note that this type of graph is published/updated on a regular basis on the  ‘GoldMinerPulse‘ blogpage.


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