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NFTRH; Status of Gold, Silver & Miners

One negative aspect of participating a little more on Twitter is that when viewing its streams, the information in tweets and all the response tweets can be overwhelming. Unlike when I look at the mainstream media, realize a single article is a crock of shit that’ll whipsaw people the wrong way, Twitter feeds can be relentless with opinions flying around left and right.

The most recent I saw was about gold’s correlation with US Treasury bonds and gold’s vulnerability therein (as we’ve already noted). What ensued in the responses were people talking about the Fed’s coming QE and how a bond bear view will be crushed until QE actually happens, about how gold is better than bonds, about how bonds are better than gold and other assured opinions framed in little blurbs.

IT’S. ALL. NOISE

Among the noise is a growing contingent of gold bear noise. Just remember, whether reading the mainstream media or tweeting their own opinions, the herd is always the herd; and in many cases we are talking about very smart people. Unfortunately, ‘smart’ has little to do with having a good bullshit detector. If the gold bears are becoming more vocal, anecdotally at least, that is right in line with a healthy pullback scenario. Those of us who remember the last bull market clearly recall how this played out time after time. Gold runs up, stalls or pulls back, gold hatred emerges and then the thing goes up again.

Bull market rules are different than bear market rules. There is always going to be a reason to worry, even in bull markets. But in bull markets price and trends win out.

As for today’s noise, we should not make assumptions about the Fed (e.g. QE is already in the bag). Secondly, even without QE the recently flattened yield curve aside (a fine companion to the current precious metals pullback, don’t you think?) the fundamentals for gold are intact. If that remains the case we will use TA to keep an eye on trends, which are obviously still up. Trends don’t tell us what is going to happen in the future, but they do tell us what is still happening and so let’s take a look at what is happening.

Gold came off by 12 bucks yesterday. No big deal. The trend has been solidly up since the consolidation broke in May. While the metal is bouncing and taking back about half of yesterday’s pullback in US pre-market a continued correction would be well within bounds of a healthy technical situation. The EMA 20 is at 1483. The SMA 50 is at 1425 and coincides with a clear shelf of short-term support. That is the point we’d want to see a healthy, routine pullback find support. But as yet we’ve not even seen the EMA 20 get tapped. Gold continues to be a candidate for a healthy pullback… and it is bullish.

gold

Silver has stair-stepped higher and in so doing is turning the moving average trends up. It has been walking up the EMA 20. At some point we’d expect the SMA 50 to be tested. The SMA 50 is rising toward the Jan./Feb. highs and we’d want to see that area around 16.20 hold because it would keep the price above the July low, and thus keep the uptrend going. I am not calling for a pullback that far in the short-term, but I am noting it is very doable and still within the bullish trend scenario. Additional note: RSI is on a short-term negative divergence and STO is inching below 80.

silver

We are on the predictable bounce back in broad stocks, which have been volatile and under performing gold lately. Is it any wonder that Gold/Stocks is among the most important macro fundamentals for gold stocks? Assuming that remains the case and considering gold’s standing vs. commodities and the political rancor and economic mini-anxiety starting to crop up, the sector and macro fundamentals are fine for what we used to note right into May was a very under valued gold stock sector. If the funda remain on the course they are on (and I don’t make assumptions, I do frequent checkups), the sector is still under valued on a bigger picture view.

HUI is making another flag much like the last one. All good so far. Except that I am a little skeptical of it because it did not need to form so quickly after the last one. It’s like Huey burst upward from its last flag in July and immediately had second thoughts. Anyway, here we see the negative RSI divergence as well and also a rolling MACD. Can the gap at 180 fill? Sure can. Am I going to predict that? Oh no.

HUI is at short-term support right now and has qualified for a healthy, bull market pullback already in dropping from near 230 to yesterday’s low of 208. The next support is the 200 round number, which includes a lateral shelf and the SMA 50. That’s the ‘healthy’ pullback level because it keeps a higher low to the July low. While the trends and potential bull would not be killed by a drop to the next support at 180, it would be uncomfortable for the bulls. Again, it’s possible within a bigger picture bull scenario and would have the benefit of fully cleaning out the hangers on. Bull markets sometimes do that you know.

hui

Finally, the HUI/Gold ratio has come off quite a bit and should be instructive about whether we’ve seen the bulk of the pullback or there is more to come. As a sign of strength, I’d like to see the .136 to .138 area hold as support. As a sign of a deeper correction, we’d likely see the HUI/Gold drop to the SMA 500 [edit: SMA 200], which is starting to turn the major trend up.

hui gold ratio