Tag Archives: gold stocks

NFTRH 363 Out Now

By Biiwii

We have been successfully managing an ‘in motion’ market since the August festivities kicked off.  It is October and Money Managers (NAAIM), Newsletter Writers (Investors Intelligence) are thoroughly spooked and Small Speculators are thoroughly short the market.  It’s a perfect contrarian setup.

Meanwhile, over in Goldbugsville there is a lot going on as well.  NFTRH 363 is 30 pages of commentary and in depth analysis on all of this and also gets its geek on (with the aid of FloatingPath.com‘s awesome graphical breakdowns) and gets inside the September Payrolls report in order to flesh out the dynamics in a flagging economy.

NFTRH 363, a very helpful market management report if I do say so myself… out now.

nftrh 363

Today’s Top Headline!

By Biiwii

Newsflash!!… → → →

Hillary Clinton Drops ‘Pricing’ Bomb on Biotech Sector With Nulcear Tweet, Gold Stocks Drop More Than 3% in Response

Ha ha ha… you have to be a long-time aficionado of this sector to get the humor.

Gold Mining Fundamentals

By Biiwii

In the previous post Steve Saville talks about the “true” fundamentals of gold, i.e. the ones that actually matter as opposed to the ones that make a good story.  In this post, let’s review something that is related but different; gold mining fundamentals.

While we (NFTRH) have been noting gold’s negative fundamentals for years (especially the status of the yield curve and a thus far ironclad confidence in the Federal Reserve and indeed, relative confidence in global central banks), gold mining sector fundamentals have been on an up-swing.  Gold’s fundamentals are generally what we have been calling macro fundamentals and the things that matter to mining operations are sector fundamentals.


In a comment included with Saville’s post linked above, we noted that acting upon manipulation ghost stories is not good for a gold bug’s financial health.  However, this is not to say that manipulation does not occur.  As we noted at the time and still fully believe, the macro backdrop was actually manipulated into being in 2011 as Operation Twist was set loose upon the financial markets with the express goal of “sanitizing” (the Fed’s own word) inflation signals out of the picture.

Op/Twist involved official selling of short-term Treasury securities and buying long-term securities.  This kick started a now years-long downtrend in the 10yr-2yr yield curve, which has been bearish for gold the whole while.  Manipulation or not, it is bearish and our advice has been that you do not stand on ideology (or worse, someone else’s ideology) with money you do not want to lose.  You hold your ideals, but play the game.

Gold Mining Fundamentals

Back on message, several of gold’s fundamental aspects also apply to the gold stock sector, but there are some wrinkles in this relationship.  For instance, a gold mining operation, unlike the metal itself, is a moving target with many inputs to its final investment case.  Unlike gold, which when tuning out the easy to comprehend promo’s about India/China demand, evil banking conspiracies and even inflation, boils down to confidence or lack thereof in centrally planned policy, gold mining is a business.  Period.  Gold itself is a refined rock.

So for instance, the strong US dollar, a negative gold fundamental as noted by Saville, is not necessarily so for gold mining.  That is because the strong dollar also affects other assets, including global (local to gold mining operations) currencies and cost-input commodities and resources that go into the mining process.

In other words and for example, a gold price rising in terms of Crude Oil is a bullish sector fundamental along with being, to a lesser degree, a macro fundamental indicator.  Here is a chart we are interpreting in NFTRH in coordination with macro events to project a future bull case on the sector.  Please don’t get over-excited; future means future.  We do not promote here.

gold-oil ratio, gold mining fundamentals

Another sector fundamental is gold’s relationship to major stock markets.  In that mainstream stock investors perceive little reason to speculate in the gold stock sector when gold is under performing stock markets, this is fundamental to the gold stock case, both in sentiment/psychology and in a practical sense.  Here is gold vs. the S&P 500, Toronto Stock Exchange and the Euro STOXX 50.  So far, it’s not very impressive.  Despite the big upset over the last month in financial markets, gold has only bumped up a little in relation to these three markets.

gold vs. S&P 500, gold mining fundamentals

au.tsx, gold mining fundamentals

gold vs. euro stoxx 50, gold mining fundamentals

And that is not even to mention the nominal technicals for gold, silver and the gold stock sector, which are and have been bearish.  That is a subject for a future article and weekly NFTRH reports.  Also, there are other macro and sector fundamental considerations beyond the scope of this article.

I just wanted to add some color to Steve Saville’s piece and also belabor the point once again that the easy to comprehend analysis you read on the gold sector is easy for a reason.  Promotions don’t work if they make you think too hard and man, in actuality it is not that easy.  It is complex and those not willing to do the work have been routinely ground up over the last several years of a negative fundamental (and technical) backdrop.  Do the work and tune out the cartoons.

13 Yr Old Gold Miner Gap

By Biiwii

It’s not serious analysis, but it is amazing how a gap in a chart can haunt a market for so long.  While there is no such gap on HUI, I took a look at the GDM and found one way back there at the start of the former secular bull market.  It is almost as if 2015 is finishing 2008’s unfinished business.

Is that what this is all about?  Is that why this market had to break the higher highs and higher lows (green arrows)?  To fill a stupid gap?  Don’t interpret the blue dotted line as support (because it isn’t).  It is just there to show how much (or little) further down the gap is.  There is no stop sign at a gap, it just wants to be filled.


The index put in a bottoming attempt last year amidst hype about Ukraine and gold’s geopolitical hedge qualities (which don’t exist beyond short-term momentum) and the Ebola virus that the “community” concocted at the most obnoxious point, right before the index failed.  Now it’s a red arrow (lower low) and a fateful gap fill looking likely either sooner or later.

GDX: Steep Declines & Buying Go Together

By Steve Saville

Steep Price Declines and Increased Buying Often Go Together

In numerous TSI commentaries over the years I’ve written about the confusion in the minds of many analysts regarding what constitutes gold supply and the relationship between supply, demand and price in the gold market. I’ve also covered the issue several times at the TSI Blog, most recently on 24th June in the post titled “More confusion about gold demand“. I’m not going to delve into this subject matter again today other than to use the example of last Monday’s trading in GDX (Gold Miners ETF) shares to further explain a point made in the past.

On Monday 20th July the GDX price fell by about 10% on record volume of 170M shares. Since every transaction involves both a purchase and a sale, more GDX shares were bought last Monday than on any other single day in this ETF’s history. And yet, this massive increase in buying occurred in parallel with a large price decline. How could this be?

Obviously, the large price decline CAUSED the massive increase in buying. Many holders of GDX shares were eager to get out and the price had to fall as far as it did to attract sufficient new buying to restore the supply-demand balance.

It’s normal for large and fast price declines in the major financial markets to be accompanied by unusually-high trading volumes, meaning that it’s normal for large and fast price declines in the major financial markets to be accompanied by increased BUYING. Most people understand this. So why is it held up as evidence that something nefarious is happening whenever an increase in gold buying accompanies a large decline in the gold price?

I can only come up with two plausible explanations. One is that many analysts and commentators switch off their brains before pontificating about gold. The other is that the relationship between gold supply, demand and price is deliberately presented in a misleading way to promote an agenda. I suspect that the former explanation applies in most cases, meaning that in most cases there’s probably more ignorance than malice involved.

Q4 2008 for Gold Stocks?

By Biiwii

The title’s hyperbole aside, back in Q4, 2008 we had what may be the biggest table pounding opportunity ever, as gold stocks outright crashed even as sector and macro fundamentals sky rocketed.  For years now I have written in NFTRH that I would love to see such a combo again.

While it is not yet engaged to even a ‘buy’ yet, let alone a table pounding situation, the combo is progressing as our indicators seem to be falling in line, one-by-one (with a couple holdouts).

While this is just a general post, I will say that it is time to be glad you tuned out the easy Indian Wedding→China Demand→Strong US jobs = inflation = institutional panic into gold style promotions in favor of the old boring view that it is only going to be an oncoming economic issue and attendant loss of confidence that will do the trick.


By Biiwii

While remaining bearish based on incomplete sector and macro fundamentals and technicals, I only pressed the short side the other day after making this GDXJ bounce post.  GDXJ was do or die and I thought it was worth a shot since, as was noted in the post “Gold stocks (as a sector) are bearish until initial resistance is cleared and then bigger picture bearish until the declining 200 day moving averages are cleared (and held).”

And that was not even including the incomplete fundamental picture.

At that point I added a short against 3x Junior Miner bull JNUG, to go with the existing short against Senior Miner 3x bull NUGT.  Today I covered the NUGT short quite profitably and continue to hold short against JNUG.

Don’t get me wrong, NFTRH’s stance has been to leave the sector the hell alone because I am not a day trader and will not pretend to be one, potentially to other peoples’ harm.  I am just a risk-o-phobe trying to call the turns in the markets, short and long-term.  Traders can do what they wish off of the analysis.

So the NUGT short, which was leveraged against the likes of GDX is covered right at the next support level we have been tracking since way back before the “drop dead gorgeous bull wedge” (that wasn’t) was even a glint in its promoter’s eye.  When this thing lost the MA 50’s in May it was cooked, especially after retesting the EMA 50 and failing on a bear flag at the beginning of June.  GDX had better bounce here or the decline is going to wipe out those who buy promotions instead of reality.


As for the Junior ETF, it looks much worse as the breakdown continues, but support is well lower.  Since my area of interest in buying the washout is in the junior and exploration space, I retained the JNUG short without as much worry about its profitability, which is good now, could get much better or could put a hurt on with the next sector hype operation.  It does not matter because barring an outright crash to our most bearish levels for the sector, in which case I’d book a great profit, short positions may well be there to oversee a coming acquisition process, assuming fundamentals look like they will come in line. *


Regardless, those in cash and looking to buy the sector may finally get the chance fairly soon.  However, it may come from well below the support levels shown above.  Only week-to-week development of the plan will provide answers on that.

* Funda are not nearly all in line, but using the Palladium-Gold ratio as one example, something is beginning to happen on the macro and while the summer can get woogley for bulls and bears (regular stock market bulls and bears, that is), it now seems to be a matter of months before changes will be apparent.