Wayne, Garth, Gold, Silver & Huey Party On

There is precedent for an inflationary/reflationary episode to see rising gold, silver and miner prices right along with commodities, resources, stocks, etc.. It happened a lot during the 2003-2008 inflationary bull market. Gold is generally counter-cyclical and gold miners are counter-cyclical businesses, but that is not the bid they are getting right now. It’s apparently coming from the inflationists (which usually ends badly… but ‘from what higher levels?’ is the question). We have an ultimate upside target for HUI.

Indeed, on a smaller scale than 2003-2008 that has been a viable plan for this phase as gold and especially silver can benefit from inflation and the miners, which would not benefit fundamentally from a cyclical reflation, have a significantly higher target (using HUI’s monthly chart as a guide). HUI does not always follow its fundamentals. In fact, it often does not. Again… ahem, 2003-2008.

So as of today it looks like I am losing my blessed balance of long the miners offsetting long broad stock market positions as they are all at the same party; the party held by whatever forces run the holiday-muted markets. Santa, Wayne and Garth, man, machine, casino patron… we’re all here and were all feelin’ no pain!

Anyway, taking these markets at technical face value my caution on the CoT for gold and silver continues to look like getting panties in a bunch over nothing as gold pokes above the daily SMA 50 and a trend line of its large bull flag that I’ve been expecting to register 1420 before all’s said and done.

gold

Silver’s daily chart has done the same in a bit more dramatic fashion. I’ve been thinking 16.25 or so, but if this is real – as opposed to holiday Memorex – the move would break the flag and start a new bull situation. We’ve been noting all along that silver has already done very good downside corrective work, so…

silver

HUI has held up like crazy. I’d been preparing for 190 and/or the rising SMA 200 on the downside at the least, but as Huey firmed in recent weeks that began to look less and less likely. Then it began forming this upward rounding pattern and finally, created a short-term support shelf at 220.

This chart shows the most recent reference point from last week’s NFTRH update, which is that short-term support area at the EMA 20 (there is more below it at the SMA 50). Trends are up, as they are with so many individual miners we chart each week.

hui

As we’ve been noting, HUI (GDX)/Gold and SIL/Silver have been positive guides all along through the correction, which has done good work in grinding out time. HUI/Gold has remained positive in its unabated uptrend (SMA 50 & 200 rising).

hui gold ratio

While SIL/Silver has remained intact and stepping higher since October.

sil silver ratio

And so here we are one year on from the Christmas Eve massacre in the stock market that erupted on elevated long-term interest rates, a Fed only just pivoting off its hawkish stance, I guess developing trade war jungle drums and the just plain over-bearish sentiment of the time. The stock market is playing to our script almost perfectly to this moment at least.

But the precious metals are not on script if I am using them as a risk ‘off’ balancer. So be it. There is precedent. But it’s time for thinking caps with respect to market sentiment, inflation/reflation, cyclicality, counter-cyclicalty and history as well.

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