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Weldon's Money Monitor: Macro Mining Shares...Pass the Sugar!


Gold-mining shares are now breaking out to the upside relative to petroleum shares.


We LOVE the latest terminology to hit the poker world, with the World Series of Poker's Main Event won by Aussie Joseph Hachem, who, when he flopped the nuts (best possible hand, unbeatable) would victoriously exclaim: "Pass the sugar!!!"

Indeed, as the U.S. Thanksgiving Holiday is upon us, and the winter chill hits here in the Northeastern U.S. and summer begins to spread down under the precious metals mining shares are exclaiming: Pass the sugar !!!

So, with the Thanksgiving break upon us, we are thankful for our own 'sugar,' as in family, friends, clients, and each and every day we are granted another opportunity to enjoy our bounty, and share our wealth.

We thank Minyanville, Todd Harrison, and the cast of thousands, including Hoofy and Boo, for the opportunity to share our thoughts.

Those thoughts are SQUARELY on the push higher in the precious metals sector, a move we are thankful to have been involved with since the very beginning, in 1999.

More recently, [written as of Wednesday, Nov. 23] we are thankful to have noticed the subtle yet significant shift in the secular bullion bull market to the point where gold is appreciating against ALL paper currencies, amid a broadening and intensifying global monetary currency debasement.

So, we say Carve the Turkey and PASS THE SUGAR, and lets get to work dissecting the most recent developments, as defined this week by the upside EXPLOSION in gold and silver mining shares.

First, note the resumed upside breakout in the AMEX Gold Bug Index, as this index sits within EASY reach of a NEW BULL MARKET HIGH, yet the longer-term 2-Year Rate-of-Change is ZERO and the 52-Week Volatility indicator is at one of its LOWEST readings in YEARS.

In fact, the set-up in the AMEX Gold Bug Index has not been this bullishly somnambulant since January of 2001, when the ROC was below zero, and the Volatility nearly as low as it is now. Those readings preceded an explosive move from 43 to 250 !!!

Indeed, note that the Volatility measure is already ... stirring to the upside.

Individually, we spotlight a couple of exemplifying examples. Goldcorp (GG) is breaking out to a new high, thus exhibiting STRONG leadership and obviously strong momentum too. Specifically, we note the interplay in the dual-dueling ROC indicators, as the 1-Year ROC broke out to the upside earlier this year preceding a preliminary push in the longer-term 2-year ROC BOTH of which have rallied from ZERO. Indeed, the last time the ROC dynamic was similar GG was trading $3.

Big-cap mining behemoth AngloGold Ashanti (AU) also exhibits potentially POWERFUL momentum-volatility dynamics, as noted below. In fact, Anglo's 52-week Volatility is significantly lower now, than when the price was $14.

Taking it DEEPER and into the macro-market netherworld of inter-market relationships, we find some most interesting nuggets in input, ALL of which FULLY supports an EXPANDING bullish dynamic in gold mining shares.

First, the unhedged gold miners defined by the HUI are threatening to breakout relative to the underlying metal, following a near perfect 50% Fibonacci retracement of the previous bull market. Moreover, the TIME of the correction was nearly 50% of the TIME of the bull move, and unfolded in a text book A-B-C corrective pattern. Evidence the chart below.

Impressive is the upside breakout in the AMEX Gold Bug Index relative to the CRB Index, seen in the chart on display below.

Given the continued HUGE rush of money into passive commodity investments, we might anticipate that Gold garners an increasing share.

INDEED, VOILA... case-in-point as we note what might be the MOST TELLING chart in today's Money Monitor, revealing that the gold mining shares are now breaking out to the upside relative to PETROLEUM SHARES. Evidence the long-term ratio chart seen below, comparing the HUI to its AMEX cousin, the XOI, or Oil and Gas Index, as the MA has been violated too.

And last, but far from least mining shares versus PAPER, as defined by the US stock market, and the S+P 500 Index. Note the ratio chart below, CLEARLY defining a renewed upside outperformance by gold shares, over the rest of the US equity paper market including the once upside leading paper-petroleum sector.

MAN, we are talking gold mining shares hitting on ALL cylinders, AND, having PLENTY of technical-gasoline in the tank. In fact, they have a FULL tank. So too does our favorite Silver stock, Pan American Silver (PAS) with which long-time readers KNOW, we have been enamored with since it was trading below $4, back in 2001.

INDEED, the current techno-volatility set-up is similar to 2001 as noted in the chart on display below.

Rewinding to the chart of the HUI versus the XOI, we note that this ties into the fundamental thought that a good deal of gold's strength has been the result of Middle Eastern PETRO-DOLLAR buying.

Is it Black Gold or, should it be reversed, to Yellow Oil ???

Further, we also note that both South African AND Australia have just revealed that output of Gold is FALLING. The latest figures from down under reveal that Australia's 3Q output was 63.5 tonnes, a decrease of (-) 2.8% from the 2Q. Worse yet, the month-month breakdown reveals that September exhibited the largest decline, one that essentially wiped out 8 months of rising output.

Further, South Africa revealed that their 3Q gold output PLUNGED by (-) 15.4 %, and did so on a YEAR-YEAR basis.

Oh, and note that the Canadian and South African stock indexes have spiked to new bull move highs on the back of mining shares.

OH, and note that the Merrill Lynch Gold Fund posted the BEST performance among ALL British Mutual Funds, in the latest week end Nov-18, according to the latest weekly data from Lipper Analytics.

BUT, we stand by OUR OWN 'revelation,' that THE MOST STELLAR PERFORMER continues to be the YEN-GOLD trade.

As evidenced in the weekly close-only chart on display below, in the year-to-date the price of Gold in Japanese Yen has rallied by a whopping 16,000 yen per ounce, from 43,000 yen, to the current price of 59,000 yen for a YTD return of +37% !!!

We have been asking for MONTHS: "Got gold, in yen ???"

Now we add: "Got gold- and silver-mining shares in USD ???"

Gobble gobble... and Pass the sugar !!!

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Positions in gold, silver
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