happy tday to you too. im half in a food coma but starting to come around now.
< If POG hits $500 in a few weeks, I would expect XAU and HUI to be much higher than they are now.
i would expect the same. below is a link to a chart series i created after seeing some of basserdans' post. its a pretty complete pic of currencies and metals that i use in determining entry and exits from my gold fund trades. perhaps you will find it useful too. steve
Yes, the poor performance of XAU/HUI lately relative to POG has greatly disappointed me, but Dan posted an article recently arguing that the trend is still that XAU/HUI are outperforming POG. I can't find that article, but it charted either the XAU or HUI divided by gold and the chart definitely showed that the trend was up.
The ratio to Gold looks oversold and ready to move higher. The question is, will the ratio move higher as gold drops, or as X/H play catch-up? I still believe that if gold continues higher, X/H will take off sharply. So far that hasn't happened, but we will see. If POG hits $500 in a few weeks, I would expect XAU and HUI to be much higher than they are now. ===============================================================
Hi Ken, The relative performance of the HUI and the XAU compared to the PoG has been dismal and, as your charts clearly show, have broken below the 50ma and is a warning that bears close watching.
I fear that if this breach doesn't reverse itself in the next few days the end of this upleg will be upon us and we'll soon be seeing the PoG at much lower levels.
Gold shares usually lead the PoG in both directions and I think the new gold ETF and the abysmal action of the USD is skewing that relationship right now to the point that the cart appears to be leading the horse.
I think next week will be very important as far as to which direction the PoG will aim for.
"Yes, the poor performance of XAU/HUI lately relative to POG has greatly disappointed me,
Hi Ken, The relative performance of the HUI and the XAU compared to the PoG has been dismal and, as your charts clearly show, have broken below the 50ma and is a warning that bears close watching.
I fear that if this breach doesn't reverse itself in the next few days the end of this upleg will be upon us and we'll soon be seeing the PoG at much lower levels." ==============================================================
Ken, As the charts show, Friday's HUI/XAU performances were a big step in the right direction. It would be great for the bullish case to get some follow through in the days ahead.
I've included the start of Adam Hamilton's latest on the subject in case you're still interested.
By: Adam Hamilton, Zeal Research November 26, 2004
Gold-stock investors and speculators, blessed with dazzling realized profits for years now, are growing ever-more nervous over an increasingly obvious anomaly in the premier HUI gold-stock index. The famous HUI leverage to gold has inexorably fizzled in the past couple months, sowing confusion and fear in its wake.
This waning HUI leverage to gold is particularly troubling because the sole reason to own gold stocks is to reap their legendary leverage to our bull market in gold. Gold stocks, ultimately just pieces of paper, are only valuable if they consistently provide a return massively higher than that of gold itself. If HUI returns don’t outstrip gold’s dramatically, then we are better off just holding physical gold itself since it is far safer than paper stocks. Gold stocks need big returns to justify their big risks!
Since the latest major interim bottoms in the HUI and gold in May, the gold stocks are up 45% upleg to date while gold is up 19%. While 45%+ returns in six months are certainly nothing to ridicule in the abstract, when considered in the context of the HUI’s traditional enormous leverage to gold they are startlingly low. If you look at the ratio of HUI gains to gold gains in this latest upleg, the HUI leverage to gold, the result is only 2.4x at the moment.
Bull to date, since the HUI bottomed in late 2000 and gold in early 2001, the HUI’s leverage to gold has been a breathtaking 9.0x or so! For every 10% gain in the price of gold over this secular bull, the HUI has registered fantastic gains approaching 90%. Naturally, after having reaped such magnificent gains for years now, we are all conditioned to expect extreme HUI leverage to gold going forward. Hence our current anemic 2.4x feels so unsettling.
I am certainly concerned about this waning HUI leverage to gold now dominating precious-metals thought. Not a day has gone by in the past couple weeks when my partners and I haven’t discussed it. I know our subscribers are concerned too, as I am receiving more and more e-mails lamenting the HUI’s malaise. This week I would like to dig into this anomaly, in the hopes of learning whether this threat is temporary or likely to persist.
The first step to understanding lies in quantifying the HUI leverage to gold at a tactical level. Rather than considering this leverage strategically in terms of 9.0x over the entire bull, we need to know how the leverage has played out over individual major uplegs and corrections. This distinction is very important. The key to understanding the present in the markets lies in seeing it in context with the past.
The HUI has only been lagging gold since the metal finally shot above $400 in September. It’s only been in the last couple months when this HUI anomaly has really become glaringly evident. If there have been temporary past episodes of similar HUI underperformance, then today’s episode is probably nothing to fear. As discussed a few weeks ago in “Trading the HUI/Gold Ratio”, sometimes the HUI outperforms gold and sometimes it does not.
In order to understand today’s unpleasant episode in context, our first graph divides the HUI into all of its major uplegs and corrections in this bull to date. The HUI has already advanced higher four times since its secular bottom in November 2000, and we are now in its fifth major upleg. All of these uplegs are noted below with the green numbers. As always, these uplegs are inevitably followed by healthy bull-market corrections, the four major of which are labeled with the red numbers below.
The actual HUI gains and losses in all of these individual major uplegs and corrections are shown in blue. Gold gains and losses over the same periods of time are noted in red. Now it is important to realize that major interim gold tops and bottoms don’t usually coincide exactly with the HUI. Thus, if this chart was divided up based on gold alone the divisions would be slightly different. But, in general terms, the major HUI moves coincide very well with the major gold moves so looking at gold over specific HUI date divisions is technically sound.
Once we have the individual upleg and correction HUI and gold gains and losses, we can finally investigate the tactical HUI leverage to gold. In each individual upleg or correction, the HUI gain or loss divided by the gold gain or loss yields the tactical HUI leverage to gold in that particular major move. These leverage numbers are rendered below in yellow. It is here that our quest to understand this current anomaly starts to bear fruit.
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