Tuesday, May 15, 2012

Our Safety Net: HUI:GOLD .204; HUI 275-300; Gold $1360 or so...

15 May 2012

I posted this letter to my friends today, and it's intended for readers with some technical knowledge of the gold and gold mining markets:

The HUI is not going to retest its 2008 lows, but the HUI:GOLD ratio is. Looks like we're gaming for a double (or triple, if you prefer) bottom on this chart, meaning the HUI:GOLD ratio probably falls to the 2000/2008 lows (.204). We're now at .243, so that's actually only four decimal points to go. No big deal (ha!).

Assuming gold swoons to $1400 or so, or stays higher, that means the low for the HUI would be 275-300, vs its low of 150 in 2008.

With the HUI at 375 today, gold at $1545, etc., I'd say the numbers stated above are the visible bottom. That is much lower than I expected, but the HUI and gold would both double their 2008 lows, which sounds a bit fractal to me.

My call: HUI:GOLD .204; HUI 275-300, Gold $1400 or so ($1360 is double the 2008 low). I'm not happy about this, but it's twice the Oct 2008 level.

On a positive note, so long as we're thinking it's a fractal double (remember, the sellers will be extinct), then the upside target for the HUI is an optimistic 1275, so who's complaining? As they say on the street, we're closer to the bottom than the top, and we're certainly finding the bottom in a hurry! I'd be a buyer at HUI 300, and there's probably no rush to take action before then!

I also expect gold to lead on the way back up while the broad market continues to fall, as we're getting some kind of revisit of 2008 for some reason....(More thoughts later, maybe???)

Here is the HUI:GOLD chart:

Hold on everybody. It will be steep and hard, but relatively brief at this juncture!

NOTE: Dan Norcini has thoughts similar to my own. Click here for Dan's thoughts on the current rout (a consequence of the parabolic September 2011 blowoff in the gold price, by the way).

17 May 2012: Possibly the levels I have identified here are our safety net. That is, if we don't fall off the tightrope, we may not have to fall this far! At this point, I'm not sure. The good news is that there IS a safety net in place, making us secure for the time being!

24 May 2012: Hmmm. More bottoming signs are in. If we're basing and starting a new uptrend, take my word for it, we shall soon be seeing the mother of all bull runs in the gold and silver markets!


  1. Hay, this is Elain.
    I briefly checked your Krystallex/Crystallex company and I wander why would anyone want to invest in company run by people whose entire life experience is in "managing" taxpayers/shareholders money in semisocialist/cronycapitalist country?

  2. Elain, that is a very perceptive question. I'd say there is an answer. That is, the situation developed gradually, and Mr. Chavez made repeated promises to deal with the company in good faith. Bolivar Gold was doing well on a smaller deposit, and was a few steps ahead, and they were successfully bought out by one of the large miners. Thus everything appeared normal. Crystallex built villages and schools, as evidence of social responsibility. In retrospect, Mr. Chavez had no intention of permitting the company to operate, but he was willing to exploit innocent investors for his own ends. However, I would not describe Mr. Chavez as a "crony capitalist," honestly, not even as a socialist. In my book, he's just another lying, antisocial, exploitative dictator....

  3. Ha, ha, ha, sorry, I meant Canada...
    Next time invest in companies that do business with more easily corruptible governments.

    ps I hope you noticed that my original somewhat ruffian comment was just a joking reference to the Seinfeld show...

  4. Hi Elain. Given global standards, I'd say Canada has a more level playing field than almost any other jurisdiction out there. That is, there are few fair or neutral governments anywhere on the planet, and as per the above, I would far rather Canada than Venezuela! I will add that Canada has more mining companies than all the other countries of the world combined, so if you're going to invest in the precious metal mining business (my area of interest), Canada has to be one of the best places to be. Despite the negative publicity about gang warfare, Mexico remains a very good jurisdiction for such investments, and in balance, still one of the best places to invest in mining ventures is the world.

    As to Seinfeld, which I understand was an excellent program, my television viewing experience is restricted to SyFy and Game of Thrones, so your allusion totally went over my head, unfortunately!

  5. Gold is still the best safe haven as far as hard asset investing go's.

  6. Indeed, and it's served that purpose well for at least 5000 years. It's quite a history!