Yesterday’s noted hints with the silver-gold and HUI-gold ratios look like they will manifest in some kind of bounce in the precious metals at today’s open. At the very least, the good news is that the precious metals are firmly counter cyclical, as the stock market is under pressure due to a weak ADP employment report. Interestingly and logically, gold got crushed yesterday along with the strong ISM, although so too did many cyclical commodities.
I continue not to like the noisy atmosphere because the media are so loud and dynamic news events continue to roil what should be reliable indicators. But I continue to believe the big picture is economic contraction and that policy makers will eventually be exposed as the boy with his finger in the dike. Hence, I continue to be a precious metals bull on the big picture, especially in gold, until that is proven to be the incorrect stance.
As noted lately, the charts have broken down and are bearish. HUI’s price remains above the 217 ‘higher low’ parameter, however. This is now taking on very important status. It is the last thing standing between HUI and a retest or loss of the June low.
If the precious metals bounce, it will be interesting to see if it has conviction or starts to fade. We had projected that the current correction could extend all the way down to current levels and the ‘higher low’ parameter. So now it is do or die time. It is amazing that with all the bearishness, HUI has only done what was already considered within normal bounds.
Gold’s chart looks worse than expected and silver got as low as 20.63, and recall that we had anticipated 19-20 support as being possible. So the point is that nothing has happened – despite the negativity – that is not normal, believe it or not. Now it is up to HUI and the 217 ‘higher low’ to hold, despite what continue to be some ugly nominal charts throughout the sector.