Gold mining GOR-fest

Gold miners (HUI) are out of whack with the Gold/Oil ratio (GOR) and the Gold/SPX ratio

This isn’t to say that the would-be bounce (HUI is postured in a small potential ‘w’ with constructive daily RSI & MACD) in the gold miners will not resume, but the charts below do not lie.

The Gold (product)/Oil (cost input commodity) ratio (GOR) shows that despite the ongoing technical correction in the miners (HUI) the index is still fairly out of whack with this sector fundamental consideration. It’s nothing like the massive over-valuations from the 2008 period and 2011 as shown here. But it is what it is. Not favorable, fundamentally.*

gold oil ratio

And as the gold bug cheering squads and Twitter influencers spew perma-dogma this macro chart showing HUI still too far above one of the most important macro fundamentals (Gold/SPX ratio) tells us that the correction – given the macro backdrop of the moment – is completely normal as the sector gets a healthy clean out that is not done yet.

gold spx ratio

It is possible that HUI is leading a recovery in Gold/SPX, which so well favors gold over SPX on a risk vs. reward basis. But pumping that view right now is little more than hopes, wishes and ‘keeping the herds in at all costs’ promotion. The chart above was our warning as published in NFTRH last summer, and it ain’t fixed yet. Beyond that, I can’t predict. I can only show charts and make sense of them.

* Of course optimists will argue that HUI rose 300+% in 2003-2008 despite even worse fundamentals, as both periods shared a positive macro fundamental, which was/is negative real yields.

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