Gold and Silver Miners Outperforming the Metals

Mish

For the first time in a long time, gold and silver miners are outperforming the metal, generally a good signal for both.

Starting November, on a daily chart, the XAU components started outperforming gold and silver.

Miners vs the Metals Weekly

Image placeholder title

A weekly chart shows these periods of overperformance and underperformance can last a long time. Recent action in the miners is encouraging as are the technical charts.

Gold Bull Flag

Image placeholder title

Silver Bull Flag

Image placeholder title

Retest of Resistance Line

Image placeholder title

Silver Bullish Divergence

Image placeholder title

The preceding two charts are from Ross Clark at Charts and Markets, via Bob Hoye at Institutional Advisors. The numbers pertain to DeMark exhaustion signals, a method I do not follow, but many technicians do.

Clark's Opinion

Silver loves to take out supporting lows, creating a Wyckoffian ‘Spring’ and bullish divergence in the RSI just prior to rallies. We have such a divergence now.

In the last thirty years silver has managed to put in seasonal lows in November and December (7 and 18 times respectively). Seasonal highs have been in January and February (14 and 10 times respectively).

There were only four instances where silver prices continued to rally past March (2016, 2011, 2006 and 2004). Rallies most commonly advance around 17%. The smallest percentage gain was 9% with a few outliers in excess of 30%. If the $16.56 low of last week holds then we can anticipate a minimum target of $18.05 with a most likely target of $19.35. An optimum transaction would be a March call option with a strike price halfway to the target. Options are available for the futures contract and the SLV ETF.

Thanks to Ross Clark and Bob Hoye. The initial charts are mine.

Mike "Mish" Shedlock

Comments (26)
No. 1-11
Scooot
Scooot

Pleased the minors are doing well. We might need a lot more gold when everyone realises the paper money is worth less. -:) (not worthless I hope)

Gas11
Gas11

Thank you in advance for the smart people in this blog. What is a good fund to invest in gold and silver miners that are beginning to outperform the metal? Merci again.

Germ
Germ

@Gas11: GDX, GDXJ, SIL, SILJ, SGDJ, JDST, Do your own "due diligence" ! Good luck!

Brexitologist
Brexitologist

In view of the international financial crisis (perceived to be terminal for the US dollar as the world´s ´reserve´ currency) the higher that gold is priced the worse the "Brexit Gold War" will get between the UK and the EU.

The contentious problems behind the "Brexit Gold War" are that: (a) the UK would not want or accept to return such HUGE amount of physical gold unless highly favorable Brexit terms are agreed in favor of the UK (b) or quite simply the BoE cannot return the highly valuable gold supposedly kept in custody for the past decades because it has sold it off or compromised it in more than one way.

This situation could also have a knock-on effect on repatriation claims of the physical gold supposedly still vaulted at the US Fed in Fort Knox and Wall Street.

Be it as it may, during the coming Brexit negotatiations we will most probably witness the weaponization of the BoE vaulted EU gold plus the BoE´s gold repatriation policy, particularly now that after the Dec. 12 election a possible ´No Deal´ is back in the cards.

So, many EU countries could / should want to simultaneously repatriate their BoE vaulted gold partially or totally… just in case… as some have requested recently.

The problem is (a) does the BoE still have everybody´s gold bullion... or was it sold off during "Brown´s bottom" ? maybe later also ? (b) is the BoE willing to return the EU gold still inside its vaults (queen´s visit included) to legitimate owners whomever they might be established to be ? Will the ECJ decide gold ownership instead of EU nation states ? Hmmm.... (c) or has the BoE re-hypothecated or encumbered such gold bullion times over with several / many alleged claimers waiting in line ?

For this "Brexit Gold War" I foresee the City, HMG and the BoE acting as one and the same, with extreme "golden" cohesion amongst all of the Old Etonian types.

On the other side, we´d have the different EU nation-states (mind you with no political union binding them together) each claiming partial or total re-patriation of its gold supposedly still vaulted at the BoE. Of course, the ECB would simultaneosuly also claim it is "their" EU gold. And the ECJ would also meddle, of course.

But however it is diced or sliced the "continental gold" now vaulted across the English Channel will most probably be weaponized by the UK during Brexit negotiations.

Imagine the conflict in no uncertain terms (and desperation) related to audit parameters, gold bar serial numbers claimed by more than one (supposedly legitimate) recipient, gold bar purity, transportation and insurance costs, etc.

JohnH
JohnH

JP Morgan holds the precious metals prices in an iron grip. They also have accumulated near 1 billion ounces of physical silver, while at the same time shorting the shit out of silver on the COMEX. Metals will rise in price when they decide it is time.

JanNL
JanNL

Chart under 'Silver Bull Flag' is of GLD instead of SLV...

Escierto
Escierto

The miners got a beat down today. The Fed is printing money and the stock market has to rise. Not good for the precious metals or the miners.

Bastiat
Bastiat

Mish, I'm disappointed to see you abandon logic and reason in favour of tea leaves and cartomancy (aka chartism).

Tester2
Tester2

Consider Russia and China. They have to hoard as should they release their annual production onto the market the price would collapse and with it the value of their hoards.

Some is anti-dollar, some is supply and demand common sense.

Harry-Ireland
Harry-Ireland

Aside from a serious spike in April 2011, Silver hasn't really accomplished much in 10 years. I own some, but I feel it's not the right time to acquire more. Not disputing the use of holding it, merely reflecting on the pricehistory and how I feel it's not priced quite right at the moment.


Global Economics

FEATURED
COMMUNITY