Sunday, April 8, 2012

Silver and Gold Stocks

Not much interest in both Silver and Gold stocks lately as the HUI index is near the lows around the summer of 2010. The following is a 3 year chart of the HUI index.  It is under the 50 and 200 day moving average which is not a good sign for the index. The RSI and Slow Stochastics are oversold, so a bounce may come sometime within the next few weeks.  Can it go lower???  One word:  Yes

Those that believe that Gold is in a potential bubble and the 1900+ peak last year was the top will not purchase any PM share long and may even go short which has been the trade to make money over the past few months.  Even if money managers wanted to invest in the PM sector, they can always purchase the ETF's and reduce risk.

Here is a chart of the Gold / HUI Index ratio over the past 3 years.  The current price of the HUI index divided by Gold.  It is currently taking 3.7 of the HUI Index to equal one ounce of Gold which is at a high over the past 3+ years.

Most of the miners have been selling Gold / Silver at higher prices than last year and the year before, so their PE ratios have dropped.  Some pay a dividend, so they are getting attractive to those that wish to speculate in this sector.

Investors in this sector may need to wait out over the summer months and into the fall before a potential rally is seen.... ?   Some large institutions may want the prices to go lower so they can pick up some bargains. (They want your shares)

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