Don’t Bet On Gold Mining Stock Prices Going Higher! Here’s Why

All the fundamental factors that have made gold such a stellar investment for the last decade are still intact…[but] there are several things that have been affecting gold negatively over the past few months, much to our dismay. Words: 367

So says P. Radomski (www.SunshineProfits.com) in edited excerpts from his original article”.

Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.

Radomski goes on to say, in part:

One of them is the dollar’s strength against the euro and gold’s recent tendency to move inversely to the dollar and in line with more risk-linked assets. This has undermined some of its safe-haven appeal. You can observe that for example in the HUI Index. Gold stocks are not only declining, but they once again do so faster than gold.

A look at the HUI Index chart (charts courtesy by http://stockcharts.com) below shows that the miners have moved lower…[and are now] below the 400 level. This is an important and bearish development. 

 

[What is currently happening] is in tune with what was seen in 2008 but the declines and rallies are less volatile this time as they are taking more time to play out. Nonetheless, the bearish implications remain, and mining stocks’ investors should seriously consider limiting exposure if this has not yet been done.

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[A look at] the gold ratio chart…[below shows] that the ratio declined heavily last week. This means that gold stocks declined much more than gold.

The ratio also had a pullback in 2008 – consequently, what we have seen since May is not overly surprising. The trend remains down and right now we appear to be in another wave lower within a bigger downtrend.

To finish off today’s essay let us have a glance at our in-house developed technical indicator that was designed to detect extreme situations on the precious metals market.

Looking at the SP Gold Stock Extreme #2 Indicator above we see that it has suggested at least a temporary rally in the mining stocks – the indicator moved below the dashed line…Maybe more short-term rally will be seen or maybe not – at this time, it is unclear in our view….

Summing up, the outlook for the mining stocks is bearish for the medium term. The short term is a bit unclear.

*http://www.sunshineprofits.com/commentary/13-jul  (To access the above article please copy the URL and paste it into your browser.)

Editor’s Note: The above article may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.

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