Gold miners have done what they should do

The gold stock correction was readable, and now it is maturing

One tool we used a year ago was the out of whack state of HUI vs. the Gold/SPX ratio. This stuff matters, and when combined with signals like the big ‘Buffett buys a gold stock!’ news along with gold influencer chest thumping, well that goes double. The linked post was literally a year and 2 days ago.

Taking the chart literally, there is much more downside to HUI in order to close the gap. But some points to consider here…

  1. The 2003-2008 inflationary phase (and gold stock bubble) featured chronic over-valuation despite volatile corrections like the one we see now. If the macro turns for real gold stocks will be shown to be trading at a nice discount.
  2. Gold is in an extreme positive risk vs. reward to stocks, so maybe some catch up in the ratio could close the gap.
  3. Or maybe we’ll get an epic downside resolution. It’s all on the table. This last one could come about if a real deflation whiff hits the macro and that would be a massive gold stock buying opportunity.

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