After producing this weekends’s report I did a little more digging into the precious metals sector and want to present some things as an add-on to NFTRH 873. I think I let the force of nature that is Trump distract my attention a bit in #873. :-(
What I see below has positive implications for gold stocks (if not so much silver stocks) per my interpretation. Especially when we consider that gold is still in its Ascending Triangle (continuation) pattern per Friday’s update.
In #873 we noted that the SIL/Silver ratio took a hit and could have more short-term downside, albeit nothing serious. Let’s look at some other ratios inside the sector.
The HUI/Gold ratio is still quite firm and not at all overbought. Indeed, MACD is coiled in a way such that it could support some significant upside (Newmont already reported Q results and popped hard on Friday). Most other gold miners have not yet reported. I might add a couple more gold miners (increase NGD, BTG, AGI, etc. and/or add the likes of B or other producers).
GDX/SIL ratio shows that the gold miners have trended down vs. silver miners. I do not see this as negative. I see it as a buy in gold stocks relative to silver stocks.
With reference to the HUI/Gold ratio above, I took a look at the HUI/Silver ratio just for the fun of it, and I like what I see here too. A bull flag downward within a bullish trend. Silver claimed the limelight after our analysis that it was probably in the offing, but I think it is time to swing back to favoring gold and gold stocks over silver and silver stocks. That would actually work well with a mid-summer market disturbance.
The Silver/Gold ratio got hit on Friday, but all it did was fill a gap within its uptrend. So, per its status at the moment it could resume upward, carrying the commodity trades and a generally benevolent inflationary macro with it. But another down day could crack the SGR play for a while.
This is personal, but I am a gold and gold stock bull. The silver play came along after impartial analysis said it was likely after silver got killed vs. gold back in April. I am retreating to my favored ground, which is to favor gold and gold stocks. Under-performance by silver, if it comes about, could be a short-term situation only, as big picture silver has barely done anything vs. gold. In a future inflationary macro silver could haul ass nominally and relational to gold.
But the Silver/Gold ratio has hit our original upside projections and remains in a downtrend.
Again personally, I became disturbed by the silver boosting going on out there after hearing only cricket bugs back in the spring. Meanwhile, HUI is perched constructive in SPX terms.
To be fair, so too is the Silver Miners ETF.
While gold looks for a good low (logically at or just below the 200 day average) in SPX terms.
Bottom Line
Silver has had its day in the sun. The stock market has had its big sentiment rally many days in the sun. I think it is time to be pivoting back to a favorable view for gold and gold miners, very possibly in nominal terms and very probably in relative terms to silver and especially the stock market.
What has gone on over the summer is a correction from the unsustainable levels reached in April. I said it then and I say it now, the corrections in relative terms and consolidations in nominal terms are healthy. We originally saw the move in silver vs. gold as a counter-trend one and that is still the case.
Okay, now I guess I can start my weekend!
:-)
