Oversold miners lagging gold
The yellow metal peaked in August 2020 at an all time high, with miners following in the slip stream. While little over one year later, gold only is about 15% off its peak, miners are oversold and lagging gold.
Trend challenges
Last April, the regression trend between the HUI miners index and gold was confirmed as miners regained the regression line and residuals turned positive. However the relief proved to be short lived. Since mid June residuals have not only been permanently negative, but they nearly attained the level briefly experienced during the March 2020 Corona sell-off. There is however one important difference: the Corona plunge was a shake-up with the trend reversing immediately after. The current grinding lower of miners and further lagging gold reminds a systemic breakdown.
Synoptic view
Synoptic view of Gold (red graph) on the left axis and the HUI (blue graph, read on the right axis) - click to enlarge to full scale |
Regression residuals
Regression residuals since June 2020 |
Discussion
- Despite higher and more persistent inflation in the US, gold doesn’t rally, which makes mining investors wary. As their investment rationale is invalidated they sell.
- The recovery of crypto-currencies (above all Bitcoin and Etherium) draws a lot of capital in those emerging asset classes. It has been repeatedly claimed that ‘Bitcoin stole gold’s thunder’.
- Despite over-extended valuations, US stock markets indexes keep grinding higher. The insurance gold can offer in adverse times seems little compelling.
HUI – Gold regression lines |
Source: https://gwyde.blogspot.com/2021/08/oversold-miners-lagging-gold.html
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