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Precious metal miners: fathoming the abyss

Posted: 07 Jul 2015, 13:59
by Gwyde
A hectic start
(drafted last night after the Comex close)
Last trading week has been short, with Canadian markets closed on the first of July and American stock markets closed on the 3rd in compensation for the US National Day on Saturday. After the Greek referendum resulted in a firm 'No', global stock markets sold off, while interest rates in the US and the financially sound EU member states slid, sending sovereign bonds higher.

The sell-off witnessed among precious metals was counter-intuitive and we got a reversal, with both gold and silver rallying intra-day to end with modest gains. On balance gold still is down 0.37% since Friday June 26, while silver is flat. Platinum is left holding the bag, with a $20 or almost 2% loss since the London close last Friday. Intraday, platinum posted a fresh post 2009 low of $1045. Shorters have been successful in driving the platinum price to the triple digits in both Euro and the Swiss franc. Triple digit platinum in USD somewhere down the line may well result in supply destruction, as most platinum mines have been producing below all sustaining costs for a while now.

Despite today's recovery, the HUI index still is down 0.55% over he week, making HUI/Gold weaken little to 0.1294, after plunging to 0.1277 last Tuesday: barely above the December 16 all time low. Who was talking about a miner recovery? You find fresh graphs on the gold miner pulse blog page.

The damage is larger for our benchmark ETF's: GDX is off 1.33% since Friday 26, while GDXJ slid 4.59%. GLDX holds the middle ground with a 2.8% loss. With a tiny 0.24% loss our contributor driven explorer & junior miner spreadsheet compares favourably. We have 7 stocks up on the list against 10 down with Mirasol flat. Sandstorm leads the way up with a double digit gain, mitigating its long term loss. With a 6.9% loss, Platinum Group Metals is a predictable shaker and the major drag on the list. Could have been worse ...

This is the most recent posting of a sequence, which can be found on the thread: Precious metal miners: fathoming the abyss
Early 'historic' postings are still available at Selecting Explorers and Junior Miners

Gold miner bear market logic

Posted: 25 Jul 2015, 13:24
by Gwyde
The bear market logic for miners: Continuation and Analysis

The summer slump for precious metals has turned into a nightmare, with gold breaking below $1100, platinum into the triple digits and silver well below $15. While the July slide is pretty bad, what makes it worse is precious metals setting fresh multi-year lows.

Compared to the plunge among miners however, the precious metals sell-off seems rather meek: the HUI/Gold ratio is threatening to drop below 0.100, which is five times lower than its 2003-08 equilibrium level and over four times lower than where HUI/Gold recovered to in 2009-2010.
In May, I drafted an article titled: Gold and the miners: identifying the bear market logic. After the latest sell-off it is worth checking whether the 'bear-market-logic' for the miners still holds.

Identifying the bear market logic
Let's start with an update of the graph the previous article ended with: Gold price (left scale) and the HUI miners index (right scale) are shown to match rather well. The oscillatory down trend of the HUI/Gold ratio ever since 2011 implies that a proportional logic is not holding any longer.

Gold (red, left scale in USD/Oz) and HUI (blue, right scale)

Continuation and/or a full resolution graph on the above link

Divergence between platinum and palladium

Posted: 24 Sep 2015, 14:09
by Gwyde
From an update on the reference article: Platinum group metals, a story of scarcity and industrial needs

After another failed recovery, Platinum permanently slid below $1100 on June 04 and further slid below $1000 since July 17. With Platinum plunging to a new post 2009 low at $931 on Sep 23, 2015, the Gold to Platinum ratio (GPR) is escalating, now peaking above 1.21.

The actual divergence between platinum and palladium is striking, with the latter rising, which seemingly also is provoking a short squeeze. The speculators' take on the falsification of emission test results for diesel engines by VW is to short platinum (used as catalysor for these engines) and go long palladium (only used as catalysor in gasoline engines).

The Palladium surge completely undoes the former Pd slide, which brought the grey metal down to $530 on Aug 26, less than a month ago. Yesterday's surge adds to a completing recovery with Pd now at $648, the highest price level since the precious metal slide started aggravating by mid July.