 |
 |
 |
 |
 |
 |
HUI break-out imminent ? Part II
by Eric
Hommelberg
November 09, 2005
The gold shares have bottomed in mid May. Ever since then the gold shares do out perform gold which is illustrated by a declining Gold/HUI ratio.
It's simple. During a bull market in gold you expect gold shares to outperform gold and that's what happened since early 2001. Just verify yourself, gold rose 90% while the HUI rose by 600+%.. Sure enough the gold shares do not react in a straight linear way to gold. Sometimes they're a bit too enthusiastic and run a bit too far ahead of gold and some times they lag the price of gold , something we've been witnessing earlier this year.
The correlation between Gold and the HUI is clearly demonstrated by the chart below and clearly shows the extreme anomaly in May when the HUI was lagging Gold tremendously
This chart clearly demonstrates that the HUI is catching up again with Gold since May 2005. Sure, the HUI still has some catching up to do but the trend is obvious.
The HUI catching up on Gold simply means a HUI outperforming Gold. a HUI outperforming gold means a decline in the Gold/HUI ratio. Do we see a downward trend in the Gold/HUI ratio since May ? Sure we do, see chart below:
Although the overall trend of the Gold/HUI ratio is down since May we saw a nasty up move during the month of October. The Gold shares were lagging the price of Gold again. But it seems now that the up move in October is on its last legs and the Gold/HUI ratio is bound to continue its established downward trend again. That's good news for the gold shares. Now when taking peek at the HUI chart itself, it seems to be on the verge of breaking out of its latest triangle formation. If that's to happen, the HUI is on its way to challenge its all time high of 258
- END -
- END -
