PM Portfolio : Presently I am
okay I get it Sir Plunger, here is my riddle.
If the xau has fallen to the 2001 levels consistent with 250 gold and gold is now at 1100, what do you expect the xau to be at 250 gold when gold hits that level again.
Will it be xau + 1. or negative 1?
Seriously, the index fell 84% as gold went up over 400%, you want more downside really? Name another index that has done anywhere near the same exponentially, I cant think of one at all.
What is the reason behind your purge? has it not already purged beyond all readson?
I look forward to your answers.
Ps, hey I just am really curious to hear your reasoning, let her fly!
Grin …Plunger’s reasoning is on the right sidebar …lots of it
oh and for the record I was bearish at 1883 which was a long held po for over 7 yrs,(Well documented) simple math via fib extensions and there was no one literally that would entertain that po at that time absolutely no one was bearish! crazy really, and now equally there is no one looking at this area to buy, absolutely incredible at these levels. jmho anything can happen just as it did at 1883.
The ultimate contrarian indicator ? yes I believe so.
A couple of comments from the peanut gallery…..
XAU is an odd one for sure. Far more brutalized than HUI, USERX, etc….I think you’d need to look into the individual components to see what happened to each entity that makes up the XAU index and do a post mortum. Clearly something failed there. As far as the other indexes are concerned, I could totally see HUI going to 60…..USERX to 2….etc…
60 yes I could see 25 even or 10. nothing makes sense in this sector, why not hui 4 really at gold 1000?
or hui 1 at 2000Gold sure….
You would expect that, if the miners continue to lead gold, that the miners will stop going down as gold continues to bottom out. I think the main issue is that so many miners just took on so much debt that they have to go bankrupt or be sold for pennies on the dollar. That is why HUI/XAU will continue to go down if the bear market isn’t over.
Here’s a chart saying that gold can still go down to $1,000 and still be part of the overall gold bull market since 2001. Although there is no sense in acting like the miners are in anything besides a brutal bear market.
I have to disagree that the gold miners are an unusually debt laden sector. The average debt/equity ratio in the gold sector is currently about 40%. That isn’t very high considering how incredibly capital intensive gold mining is. Other sectors take on much more debt than that. Investors currently believe that gold is a pet rock. Gold and the miners won’t begin a new bull market until they begin to see gold and silver as money once again. And I don’t think that will happen until it becomes clear that the Fed will support the stock market and housing market with easy money in perpetuity. As of right now, the public believes that they about to embark on a tightening spree. The September Fed meeting may be when that belief begins to change.