Wednesday, September 14, 2016

A Short Look At The Precious Metals Market

One of my readers has asked me about the current situation in the precious metals sector. Let me show three charts:

Chart 1

Chart 1 shows the relationship between junior miners (GDXJ) and big miners (GDX). In my previous articles I was claiming that during a bull market in gold GDXJ should be stronger than GDX. Try to assess what trend you see.

Chart 2

Chart 2 shows the relationship between big miners (GDX) and the gold itself. Generally, bull market in gold is supported by big miners being stronger than gold (it is called leverage). The circle marked in black shows that the upward trend has been broken. Now the question is: did this relationship entered the downward trend? 

Chart 3

Chart 3 shows the relationship between silver and gold. I believe that during a bull market in gold silver outperforms gold. Try to assess what trend you see.

Note on Technical Analysis

As my readers know I am not a fan of Technical Analysis. Signals generated by this sort of analysis are always delayed and may distract investors from real issues. And the real issue, always, is the value of any company.

What is more, when I was young Technical Analysis was the main tool I was using in my investment decisions. I have to tell you - in most cases these decisions were totally wrong. Now this kind of analysis is just a minor supplement to the tools I am using.


  1. Many gurus (or charlatans if you prefer) earn a living through technical analysis, but I have never seen a comprehensive study of its reliability. In any case, central bank actions can overwhelm any pattern.

  2. Yes, they earn a living but their followers do not. Take, for example, these "experts" on Elliott Wave Theory.