I am focusing on the HUI today because it has a much longer history than the GDX. The HUI is comprised of all the major global gold producers such as Goldcorp, Barrick, Newmont, Gold Fields, Kinross, etc.

I'm going to look at 3 different charts. The first one is the HUI/Gold chart going back 20 years:

HUI/Gold (20 Year)

This is a really amazing chart because it clearly illustrates a couple of things which I don't think many people pay much attention to:

  • The gold miners actually peaked, in gold terms, at the end of 2003. Yes, that's right. I know in nominal terms the peak didn't take place until the 2nd half of 2011, however, relative to gold the sector had been underperforming for 8 years at that point!
  • The 2nd half of 2015/January 2016 lows saw the miners reach such depressed levels that they were actually cheaper relative to gold than they were in 2000 when gold was below $300/ounce!

I believe that a breakout above the .22 level (shaded area above) in the HUI/Gold ratio would give us the strongest green light yet that the precious metals mining sector is in the midst of a new cyclical bull market.

The next chart is a 20-year chart of the HUI in nominal terms:

HUI (Monthly - 20 year)

A couple of things stand out to me here as well:

  • The HUI made a major top over several years (primarily 2010-2012) before plunging lower in 2013. The measured move objective from this major top was reached (and slightly exceeded) at the 2015 lows.
  • If we are in a new cyclical bull market in the gold miners the next leg higher should easily exceed the August 2016 high at 286. In fact, the next leg higher should see the HUI reach at least the 350 level.

A breakout above the 220-225 area over the next couple of weeks would offer an excellent start to this rally:

HUI (Daily - 2 Year)

Last week's 'golden cross' (50-day moving average crossing above the 200-day moving average) is an encouraging sign; during bull markets golden crosses have a strong tendency to come near the beginning of much larger rallies (see March 2016, April 2009, August 2005, etc.), however, during bear markets they often closely coincide with bull traps. We should know the answer soon enough. 


DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The views expressed in this publication and on the EnergyandGold website do not necessarily reflect the views of Energy and Gold Publishing LTD, publisher of EnergyandGold.com. This publication is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles on www.SEDAR.com for important risk disclosures. It’s your money and your responsibility.