Wednesday, January 25, 2012

Gold Silver Pop, HUI analysis

After the fed mention that interest rates will be low until 2014, both Gold and Silver popped to the upside.  Gold was up $44.40 to $1710 (2.66%), Silver was up $1.22 to $33.27 (3.81%).  This may be the start of a solid 1st quarter upside rally...

As far as the Gold and Silver stocks, here is a weekly chart of the HUI

The HUI has been in a sideways consolidation since the 4th quarter of 2010.  With both Gold and Silver prices higher than the 2010 prices, earnings for mining companies that are in production will be able to beat the 2010 and 2011 quarterly and yearly earnings.  This should be enough to spark the miners to the upside sometime within the 2012 year.

A fibonacci retracement is drawn from the run-up in 2003 and the 423.6 level is around the ~735 area.  This may be the next stop/resistance area for the HUI index.

Some have speculated that because of the Gold and Silver ETF's, the interest in mining stocks have gone down.  There is less risk with the ETF's compared to the risks of holding onto a mining company which can report many negative items and issues with regards to their mining operation.  There are risks with the ETF's, but those that are invested in them are most likely trading them and not holding them long term. If the ETF's start a divergence from the bullion prices, the hedge funds and all those on Wall Street will have their finger on the mouse button to exit first asap.

You also hear many analysists state that Gold is in a bubble and that it is going down.  If these fund managers believe that Gold is in a bubble, do you think they will invest in a Gold or Silver miner?  Probably not...  

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