The precious metals complex shows few signs of slowing down. While silver has not busted upward vs. gold (it remains in a sideways pattern at a depressed level), there appears to be a certain stickiness to the current rally leg of this major bull market leg (precious metals in general).
I am on watch for a normal pullback vs. possible acceleration despite gold at target (3000+) and the complex getting overbought. Silver’s target is 42. HUI’s next target has been 375+ (currently: 361). As for gold stocks, I’ll stick with 375+ for now. But if acceleration and one day blow-off dynamics engage, who knows where this will halt? The big picture target of 500?
First of all, my smart TV tried to tempt me to watch a YouTube video with commodity/resources guru (far from it, in my book) Rick Rule, predicting what… something like $200 or $500 (can’t remember which) silver due to where it “should” be in relation to gold. In short, tune that crap out. #promotion #eyeballharvesting
But if silver does accelerate, it would probably cut through 42 like a knife through melting butter. HUI 500 sooner than anticipated? Why not? We’ll look at HUI from daily, weekly and monthly perspectives.
But first, let’s note that the Gold Miners Bullish Percent (an overbought/oversold technical indicator) is back to frothy and overbought. But let’s also note that we’ve been managing a bull market trend in the indicator that began in 2022 after we identified it in 2023. This is overbought and bullish.
The longer-term chart gives more context, specifically with the uptrending monthly EMA 20, which is likely destined for a higher high to 2020. The situation can go higher, and overbought can become more overbought. O/B or not, it’s bullish.
HUI/Gold ratio is still on the theme of the current rally leg, making higher highs/lows. It is also near what could be a leg 3 end point. But check out HUI/SPX. A break to a new cycle high, retest and then a tick of a new high. This is bullish and if/as it persists and progresses, will be noticed by a much larger population of investors.
Here is a longer-term view of HUI/SPX. That folks, is progress (and a likely breakout from a long basing pattern).
HUI daily has enough fuel (only moderately overbought) to get to the 375+ target. In my opinion, one more (let’s call it wave 4 down) pullback could be needed to fuel up for 500.
HUI weekly is on a similar message. Again, the goal has been to tick a higher high to 2020, which was around 374. Now, a higher high could be 376 or it could be significantly higher. It will depend on what animal spirits may be in the market at the time. It will also depend on whether it’s a blow off/blow out situation or a normal continuing rally, which again in my opinion, should include one more routine but sentiment clearing pullback. “Should”, not “will”.
The monthly chart has been advising this bullish message since Huey made the wave 2 low in 2018 and especially the wave 3 high in 2020. Beyond the short-term dynamics noted above, the reason I entertain a shot to 500 sooner rather than later is the length of that agonizing correction from 2020 to point 4 in 2022 and then a still intact corrective channel into 2024.
That was long and arduous work done to cement the popular wisdom that “gold stocks suck”. In other words, pending short-term pullbacks and volatility, the fuel for 500 is there.
Monthly RSI is not particularly overbought and MACD is sweet.
Here once again is a the monthly chart showing HUI busting upward in a phase that IS fundamentally sound (by one measure, the T-Bill yield/Fed Funds), as opposed to previous phases that were either neutral or negative.
Bottom Line
We should be prepared for a bull market pullback/buying opportunity as the sector becomes overbought. But it is a bull market and HUI is ultimately targeting 500 (+/-) more so now, as it has been since making the 2020 high. There is reason to not necessarily expect, but surely not be surprised by an acceleration that does not stop to let passengers on the train. It’s why I hedge at times, rather than sell most items.
