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Are gold and gold stocks set to bottom? Not yet, according to my long-term
measures of greed and fear. [I think a look at each of them below will substantiate my conclusion.] Words: 390
So says Cam Hui (www.humblestudentofthemarkets.blogspot.ca) 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.
Hui goes on to say, in part:
The Silver-to-Gold Ratio
Consider, for example, the silver-to-gold ratio. Silver has long been regarded as a high-beta play on gold. The chart below of this ratio shows that while sentiment has descended from levels indicating excessive bullishness, they are not at levels consistent with a long-term bottom yet
The TSX Venture-to-TSX Composite Ratio
Here in Canada, we also have a good measure of speculation levels in resource and junior resource stocks. The chart below shows the ratio of the TSX Venture Index, which is comprised mainly of junior resource companies, against the more senior and established TSX Composite.
This relative return ratio also tells the story of falling speculative fever, but readings are not at levels consistent with capitulation bottoms. (Note that the scale of this chart is 13 years, which is the amount of history available, compared to the silver/gold ratio above that has a 20 year history.)
The HUI-t0-Gold Ratio
What about the ratio of gold stocks to gold? The chart below shows the HUI to gold bullion ratio. While we are nearing levels where a meaningful bottom can be established, readings are not at screaming buy levels yet.
The above readings are suggestive of a tradable short-term bottom in gold and gold stocks is coming up, but a long- or even intermediate-term bottom may have to wait. Given that gold prices are deflating in the wake of the French and Greek elections, that short-term bottom may be fast approaching.
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Conclusion
My inner trader tells me that I could buy here, but I need to carefully define how much risk I am willing to take. My inner investor tells me that there is value at current levels and I can accumulate positions, but there may be better entry points down the road.
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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We suspect that many precious metals investors are saying, “We don’t want to play anymore!” and our reply is, “You mean you want to quit right now? Right at the bottom of this cycle? You must be crazy – and that is crazy with a capital C!” True, this is a very challenging market environment for resource shares, but we know what the ultimate outcome will be: higher share prices. The only question is “when” and our opinion is that we are very close in time (within days or a week or two at most) of being able to say that the lows are behind us. Let me explain. Words: 785
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13. Is it Time to Load Up on Gold Stocks?
By almost any measure, gold stocks are undervalued but should we load up? Gold mining companies are earning record margins. Stock prices, however, have not responded in similar fashion but when the broader investing community begins to take notice, investors will snap up these highly profitable stocks and push prices higher. The “catch up” in gold stocks could be tremendous but the question, of course, is timing. We don’t know when gold stocks will begin to catch up and the data don’t suggest they must rise right now or that they’ve hit bottom so should we load up just now? Words: 590