As The HUI Turns

Sat, Aug 16, 2014 - 1:41pm

Yes, holding the miners has been a bit of a soap opera these past few years. And yes, I still advocate physical metal over paper shares. However, it is quite clear that a bottom has been formed in the major index, the HUI. This implies higher mining share prices ahead and an opportunity to add to your stack of fiat.

There's no sense in drowning in the negative. We all know what transpired. As the bullion banks savagely and counter-intuitively smashed the metals lower in 2012 and 2013, the mining shares were hit even worse. From a high near 640 in August of 2011, the HUI index fell to a low near 190 late last year. That's...gulp...a drop of over 70%. Over the same time period, gold fell from $1920 to $1180. That's a drop of over 38%.

However, as we've been claiming all year, gold put in a Double Bottom in late 2013 and is now on the road to recovery and a resumption of its bull market. Since January, I've had a price target of $1500 for 2014 and I see no reason to adjust that forecast. The HUI has recovered, too, and has already moved more than 30% off of the late 2013 lows. (We first noticed this and wrote about it in January: So, the questions become:

Is that it? Will the miners now roll over and continue their downtrend or will they continue to rally?

The answer is in the charts.

Let's start with the daily chart. This chart shows us the daily changes to the HUI since the first if the year:

What do we see?

  • After a strong early rally, the HUI backed off in the spring.
  • Note, though, that it did not make a new low when it bottomed again in late May.
  • Since then, it has rallied back toward the 240-250 area, all the while continuing to burn off some short-term "overboughtedness". See the blue oval on the Relative Strength Index.
  • And though the MACD is above zero, note that the lines have recently had a bullish cross.

The HUI struggled this week to close above resistance near 250. Therefore, that it fell back Friday in exhaustion was by no means a surprise. More short-term weakness may be in store early next week (though geo-politics may play an overriding role). If more selling materializes, I'd look for a dip into support near 242 and, below there near 237.

Regardless, in the end, I believe that the daily chart of the HUI actually looks pretty good and it indicates that the miners, as a group, are looking like a good bet to extend their 2014 gains.

But what about the bigger picture. Would any new rally just run out of gas? Are the miners due to roll over eventually and is the index in danger of crashing to new, sub-200 lows? For answers, we need to look at the longer-term, weekly chart:

Notice the more complete picture that has emerged.

  • The is a clear, reverse head-and-shoulder bottom. If you look closely, this is marked on the chart with the blue lines. The left "shoulder" came in during the summer of 2013 near 200. The "head" came in late last year just below 190 and the right "shoulder" was established in late May, again near 200.
  • Also note the pennant that has formed by connecting the lower highs of the past 16 months as well as the higher lows.
  • All the while, momentum in the shares has grown as evidenced by that generally rising RSI and MACD.

To me, the conclusion is obvious. Having been brutally driven lower in 2012-2103, the miners have, in fact, bottomed. They are not headed lower and new lows will be not be forthcoming. Instead, the shares will continue to grind higher for the remainder of this year, helped along by rallies in gold and silver prices. By the end of the year, the HUI will be pressing up against the resistance area noted as a red rectangle on the weekly chart, somewhere near 295-300.

If I'm right about this, the mining shares will end up being one of the "top-performing sectors for 2014" with a return of over 50%. This will be noted in most of the financial press as the year comes to a close and then, as re-allocation and rebalancing occurs in early 2015, the HUI should burst through 300 and solidify the recovery. A further rally for gold and silver in 2015 will spark even higher prices for the shares and the recovery/rally/bull market will continue.

One last thing, though. Holding individual mining shares exposes you to all sorts of risks that holders of physical metal don't have to deal with. However, if you are prepared to assume these risks, the opportunity to make some fiat currency in the weeks ahead looks pretty promising.


About the Author

turd [at] tfmetalsreport [dot] com ()


Aug 16, 2014 - 1:50pm


Ah the HUI

Aug 16, 2014 - 1:55pm

Do miners pay dividends?

Surely I cannot be first, even after reading the article... so I'll call Third!

And you know, if we find miners or Minng sector ETFs that pay a dividend, that might not be a bad place to steer our loved ones who believe in the system still. Making some fiat and earning a % return in dividends while being interested in the price of gold could open some eyes.

Aug 16, 2014 - 2:05pm

Yes, it is only a daily Duece!

Thanks Turd, appreciate all your hard work and loving the general post for all (on a budget these days) on this one!!!

What's the thought on that gap filling on the daily chart at the 230-226 area?

Aug 16, 2014 - 2:07pm

$1500 Target

It will be hard to reach $1500 in the remaining year. I expect to reach $1500 in spring 2015. I like bold calls though. Good luck!

Aug 16, 2014 - 2:44pm


Are the days of our lives. Lmao

Aug 16, 2014 - 2:54pm

HUI in 2014

With the HUI down around 70% the past few years some individual miners went down 80 - 90 %! Fear has been replaced by greed and quiet buying since last summer. I still remember the pain of watching miners go down till December 31, 2013. U.S. Silver and Gold Inc. bottomed at 24 cents and now hit 50 cents. GORO finally bottomed at $3.52 and up to $6.14. Most every miner is being bought on the dips compared to last year going steadily down. The powers that be almost daily send miners down at the opening bell till around noon. Then the buying slowly brings the miners back to green for the daily close. The volume has been generally up as miners rise and less volume to the down side.

My friends and I are taking positions in "lottery ticket" miners as our long shot gamble. I really like New World Gold Corp with rising revenue and earnings and providing their mills to other miners in Ecaudor and Peru for both a fee and percentage of their gold. They also just announced a stock buy back before the end of this year. It closed Friday at .006 so the cheap shares remind me of an inexpensive call option without the time restraints.

Turd's excellent knowledge, insights, and HUI action give me hope to make some fiat to buy more silver. Good luck to all and thanks Turd!

sierra skier
Aug 16, 2014 - 4:05pm

Great Outook for the HUI

However I hold only physical as I have no desire to increase my risk.

Aug 16, 2014 - 4:35pm

Good point on holding only Physical sskier

I only have a taste of miners in Scottrade and today Turd has redirected my path into Direct Registration, I have been wanting to since a year ago plus. Well since this Thread actually!!!

The Paper Armageddon Portfolio

By Pining 4 the Fjords | Thursday, August 1, 2013 at 8:42 am

Nick Elway posted his trip into DR at the end in the comments section for anyone that has not thought about or done it.

Thanks Turd and Nick!!!

Aug 16, 2014 - 4:54pm

If Gold hits $1500

Not only the $HUI, but the shares in the Junior Gold Miners ETF (GDXJ) and the Gold Explorers ETF (GLDX) could go ballistic.. Many if the projects owned by the explorers & developers that are either uneconomical or have an IRR that look decent at $1200-1300, will look fantastic at $1500 Gold and higher.

Turd, I know your focus is primarily on the $Hui here in this article with the LargeCap producers but do you happen to track the Junior Gold Miners or the GoldExplorers? If so, it would be interesting to hear if you feel those charts paint a similar Bullish LT picture as the Majors in the $HUI.

Aug 16, 2014 - 5:22pm

If your interested.....


Gold Corp. Agnico Eagle, Detour, Endevour, Pan American

Aug 16, 2014 - 5:36pm

Earnings have been weak

I have switched my major holding to Sandstorm Gold; I don't want to get caught out by impairment write downs or unexpected costs, and I can largely avoid that with the streaming companies. There is enough exposure to risk in Sandstorm (e.g. Oyu Tolgoi Mongolian tax dispute and potential delay, Serra Pelada, Luna Gold) so that if the issues all get resolved we could have a hockey stick re-rating of the stock.

Aug 16, 2014 - 5:46pm

For those that were interested in Maestro Above


Endeavor, Rio Alto, Novo Resources, Royal Gold, Silver Wheaton, Agnico Eagle, Timmins Gold and Norfolk Southern for you railroad enthusiasts.

Aug 16, 2014 - 6:43pm

it's best to get completely out of paper silver

Physical Silver isn't going to move up in price until it REALLY moves up in price. Fiats stuck in the paper casino will miss the boat.

Being stuck in the paper casino is a long slow burn. If they do move the miners up, it will probably be to keep people in paper until it's too late for them to hit the jammed exits toward stacking.

In other words, there is the right position and the wrong position. There is no "best maneuver" within the wrong position.

Just keep stackin'. keep transitioning away from the old "system" mindset, and toward...

sunrise wallpaper 7713

Aug 16, 2014 - 7:17pm


Huiwee Turd that was one hell of a corn snake port a pot speech. Better use some fiat and clean the junk in the trunk... Good stuff !!!

old tradesman
Aug 16, 2014 - 7:20pm
Aug 16, 2014 - 8:02pm

Re:Do miners pay dividends?

Some Majors like NEM have a gold-linked dividend policy and GoldCorp just paid out their eighth Monthly Dividend in 2014 och has paid a monthly dividend since since 2003. ( )

But here is a link to a table of dividend-paying gold stocks, and a chart how a theoretical portfolio of them has performed over the years.

@lakedweller2 interesting portfolio, would love to go long Rio if there is a pullback in those shares.

Aug 16, 2014 - 8:11pm

Long anv

I like the hated , anv one of the most shorted juniors out there !

Taking a big risk but it seems to have found support at this level .

Aug 16, 2014 - 8:37pm

@Gamble Re: the hated

Lost a lot on Colossus, hoping to recover and more with Carpathian Gold.

Edit: hoping but not counting on it ;-)

Urban Roman
Aug 16, 2014 - 8:38pm

Let us remember the wisdom of our friend SRSrocco

The miners can't make money with these metals prices.

They aren't making money now. And they won't make money until prices rise a lot.

Also, miners, being common stocks can go to zero. Your stack cannot.

In other news, my vault subscription has expired. Did I miss anything?

Aug 16, 2014 - 9:59pm

Squid killer from Africa

A new axis for BRICS.

Out of necessity to minimise bank grab, the poor provide the way for the west.

Aug 16, 2014 - 9:59pm

Seaking of the HUI

From Zeal...

"But investing is not about popularity, but profits. During gold stocks’ incredible secular bull between November 2000 and September 2011, the flagship HUI gold-stock index rocketed 1664% higher! Over that same span, the broad-market S&P 500 stock index lost 14%. Since general stocks’secular bear was born in March 2000, the S&P 500 is up 27% as of this week. But the HUI climbed 279% during that time.

That massive gold-stock outperformance is back this year, though you will rarely hear about it on CNBC. Year-to-date, the HUI is up 25.8% despite gold only being up 8.7%. This compares to a rather pathetic 5.3% for the universally-adored S&P 500. Gold stocks have returned from the dead, fighting howling sentiment headwinds to already be one of 2014’s top-performing sectors. And gold’s strong season is just starting."

Aug 16, 2014 - 10:28pm


Gold is capped. No reason to think TPTB will relent any time soon. No rise from here this year. Likely year end smash (with limited liquidity last couple weeks of December) to say ... $1,175 ...

Seriously, they are in control.


Aug 16, 2014 - 10:47pm

My Fab Four

Goldcorp, Hecla, Aurico Gold, and Great Panther limited.

IMHO holding miners is a heck a lot safer than playing the options and options on options gambit.

Aug 17, 2014 - 1:58am

ATT: Turd

Way off topic but I thought you might find this interesting and enlightening. My apologies to everyone else.

Safety Dan
Aug 17, 2014 - 1:59am

@ Urban Roman

One should remember that not all miners are losing money at these prices. Some mines can make money at $9.00oz in Ag and $600oz in Au. Go back 10 years or so looking at when Ag & Au prices were that amount and the various mining companies that were in business. Then look at their ore body projections; i.e., 20 year ore body mined at 12,000 tons per month @ $600oz.

Ore bodies are defined by drilling & analizing samples, then engineered for mining procedure, blending and concentrating & refining. All this is in the engineering report of a given ore body. Some ore bodies may be only 5-10 years work. Others will be 15-30yrs work.They always define a bottom line PM price for profit. Granted costs, like diesel & labor go up; however PM prices usually escalate enough to cover those higher costs. Those 'soft costs' are usually estimated in the final budget projections. The updated final document is a bible for when the mine can operate profitably or in the red.

Its not accurate to say all miners can't make money at these prices. I'm sure you are correct that some of them cannot. Probably allot of the miners cannot. Again, it depends on budgets and ore body mining duration. Other profitable mines might shut down for higher profits at a later date. Hope that helps clarify things a bit.

Aug 17, 2014 - 8:27am

SLW was Down big last week

I like the streamers, especially Silver Wheaton, which because of its broad exposure to many miners probably has less risk than an individual miner. However, even though it has less risks than many, it was killed last week and was down over 5 per cent on Thursday and about 1 per cent on Friday. Thursday it was down because it missed earnings expectations by .02 cents due largely to lower silver prices, which should not be a surprise to anyone who follows silver. While SLW is focused mainly on silver it has increased its exposure to gold recently. SAND was formed by former SLW people and is a streamer focused on gold.

Aug 17, 2014 - 9:46am

Miner shares


The balanced PM investments should always have the physical metal as it's primary holding. The shares in decreasing proportions, with options and futures in a very small percentage at the very top of the investment pyramid. But I believe these proportions should be adjusted to the situation. Such as now when the miners are so hated. How can you get a better contrary indicator? I think a discussion on these proportions would be apropos at this point.

PM's = min of 50% of any portfolio

Physical = 70-85% of the PM portfolio

PM stock = 15-20% of the PM portfolio

Options in PM"s portfolio = balance

Just a thought. Wonder what the concensis is.

Aug 17, 2014 - 10:00am


In 2000 I was convinced that a 20 yr. bull phase was starting in the PM's. The last phase to be manic which I believe to be coming. With such a phase, logic would say to expect the most severe correction prior. So, here we are. This next phase will separate the men from the boys ( and already has to a greater degree )

( sorry ladies, no disrespect with this gender specific aphorism )

Aug 17, 2014 - 11:12am

LCS Update

Just a quick LCS update. Went in yesterday to add a few silver rounds to my stack. I was shocked at how much inventory they had of "used" coins. The most I've ever seen.

Talked to the big dog and he said no one is buying right now. His quote "everyone has bought what they can at these low prices. Miners can't afford these prices but it's summer and sales are slow...not just here, around the country."

Aug 17, 2014 - 11:36am


No one I know is buying the physical. Been that way for 14 years. The smart money isn't going into the local coin shop. FACT: since 2000 gold and silver are up an average of 15 percent per year. FACT: s & p is up an average of 1.5 percent per year since 2000 FACT: pms have out performed the s&p 10 times. Big move still coming. Its on till 2020. All else is just noise to distract.

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