"The HUI is the new Spot Price. REACTION!"

Sat, Aug 20, 2016 - 9:32am

On Friday, I posted a comment that our friend TF suggested would make an interesting weekend thread for group discussion. As a loyal soldier in the Fabulous Turd Army (a phrase that strikes fear in the hearts of Keynesians everywhere, most recently in the halls of the US Mint via FOI requests via our friend Koos Jansen) I am hereby submitting the idea as a thread for scrutiny, discussion, scorn, etc. This will be the extended version, with some extra stuff that Murphy (my pal and partner in fevered theorizing) and I have been throwing back and forth, both here and outside TFMR. In the immortal words of Hans and Franz, "Listen to me now, and hear me later":

1. I submit that spot price for gold and silver is dead. The markets have left it dying and bleeding on the side of the highway like roadkill. The actual value-setting mechanism for precious metals has become the mining indexes. Spot price, as TF has argued for years now, only "prices" what people are willing to pay for the paper derivative that tries to masquerade as gold and silver. It does not price actual gold and silver.

In the past, this might have been dismissed as just some semantic tic of goldbugs, but I argue that the markets... YES, THE BIG MONEY, INVESTING IN BILLIONS WITH A B, "WE ARE THE ONES WHO COUNT" MARKETS... are proving that they too now understand this to be the case. GLD in blue, HUI in green... Check it:

GLD is up 26% YTD. Fine, that's lovely. But the HUI is up 144% !! That is 5.5 times the rise in the so-called "price" in gold, a rise that is out of whack even given the "leaner miners, more profitable, etc etc" earnings potentials. The share price rise is outstripping those things, and more importantly, share price rises during times when spot price stays flat!!! Same with silver.

It has been fascinating to see capping, mini-beatdowns in spot price, and all increasingly ignored by big money... but they aren't buying GLD (as if those tons are actually physically there) and they aren't buying SLV. They sure as hell aren't standing for delivery on the Comex, which they know doesn't have the metal to deliver. Big money has become smart money, and is ignoring GLD, SLV, and Comex futures as flawed instruments! No, those billions are flowing into the miners. You can see it in the daily fluctuations as spot price gets knocked down, the miners dip briefly, then rise back up strongly. Spot price stays tepid and weak, because nobody wants to put big money into those flawed instruments!

2. On a daily basis, the HUI and other indexes trade like real things. Part of the discussion Murphy and I have had is based just on the way these things have traded, vs spot price. Admittedly, much of this is "feel" in a trading, chart watching sense of seeing the tick for tick stuff, but I suspect that the traders out there will know what I'm talking about. I would be very interested in hearing from others, pro or con, on this. But basically, here is what we are seeing: Spot gold and silver is doing the same old crap it always does, including the tricks to manipulate price that we are quite used to (i.e., spoofing bids to cap, large bunches of orders suddenly coming in out of nowhere to overwhelm the bid during globex trading to knock a cheap 4-8 dollars off gold, etc etc etc). You guys know the drill, the stuff that has become old hat since the Blythe Masters days- we've all gotten so used to it, its just "how the metals trade" including how, as TF constantly points out, usually the biggest input moving gold price is the dollar/yen cross.

Now, have you ever sat back and really thought about how truly absurd it is that the best, most pure store of value on the planet- the golden monetary metal, something that a billion Chinese and a billion Indians (especially during wedding season) and at least another billion people all told worldwide all hold precious, something held and owned by literally every major and minor Central Bank on earth - has its price usually set during daily trading by fluctuations between the dollar and the yen? The Yen! A currency printed like napkins by a mad Keynesian Kamikazi Kuroda whose country has been working on a "lost decade" for 22 years now? Whose aging population represents just 1.7% of the world ? And THAT is the major trading input setting worldwide gold price on a daily and weekly basis? Yup, thanks to the algos, the HFT inputs, and the deliberately directed leverage, that's largely how we determine the global price of this:

But wait! Over the last six months, and especially over the last three I think, what we have increasingly started seeing (not all the time, but more often) is that when stupid stuff happens to the gold and silver price, the HUI and other mining indexes shrug it off ! They are starting to trade like spot price would in a rational market! THAT is the sense I'm trying to convey from a traders perspective- it's not that they never go down, its that when they go down it is for reasonable reasons, not fakey "PM market" reasons. Look at the difference between silver over the last seven weeks, and the silver mining index SIL over the last seven weeks. Huge! Trust me, its been even more fun watching on a daily basis!

More to the point, the big money behind the mining shares seems to have seen behind the curtain... and the money is flowing rationally and moving markets. That money isn't flowing into GLD and SLV, AND its flowing into miners at times that occasionally have been quite at odds with the old "let's be tricksy with spot price" regime. It has been REALLY fun to watch.

3. Is this real or just another tricksy trick? There is another possible permutation for these observations that is worth noting and discussing, though admittedly this is not for the faint of heart! Murph first pointed out to me months ago the strange juxtaposition of (a) the miners responding to every dip as strong as mustard gas, yet (b) short interest on the Comex growing and growing until it has reached epic proportions at times, though it has pulled back somewhat of late. Still, this is a possible scenario. As Murph recently said:

Furthermore it seems to me and maybe P4 as well, that tptb are doing it as planned. Keeping the short contracts at ridiculous, high levels while at the same time buying up miners.

How can the miners make these giant gains if the metals price stays so much lower percentage wise? Easy peasy, the big boys don't care. Some time in the future when they have enough longs in their dark pools they will cover their shorts and let the spot prices run.

Thus you have what I call the "Murphy two-step": Spot price suppression through absurdly huge short interest (150% of total worldwide yearly mine supply in silver, at one point, for the Comex alone... a single exchange leveraged something like 300 to one, paper to actual physical if memory serves) while gobbling up mining shares, then watch the magic of leverage work in your favor when those shorts are covered, price is allowed to run, and whatever losses are incurred are repaid ten-fold by the rise in your now massive mining stock positions! Tinfoil hat? Yeah, probably. I'm sure that powerful interests with the means, the motive, the opportunity, and the "get out of jail free" cards that come with certain connections wouldn't dream, in an era of zero interest rates and scarce yield, of creating a quarter-trillion dollar ten-bagger for themselves. Naw, that would be illegal.

Regardless, what we DO have is the makings of a major disconnect, as billions of dollars (like the Swiss National Bank, etc) are choosing to invest in gold and silver miners, all the while "price" continues to be set by the traditional flawed paper derivative dinosaurs. No matter what the mechanism or the degree of planning (conspiracy or free market), one thing seems to be certain: HUI is the new Spot Price.

About the Author


Aug 20, 2016 - 9:42am

"All Hail HUI!"

"All Hail HUI!"

Aug 20, 2016 - 9:56am

What a Saturday treat.

A rare and much sought after article by Pining!

... including a new classic creative phrase: " Keynesian Kamikazi Kuroda "

Dr. P. Metals
Aug 20, 2016 - 10:27am

Don't quite get it

The miners still have to sell at the paper derivative pricing scheme point so...until that collapses this makes no sense. The only possible thought is that those who are buying miners "know" that scheme will be ending shortly. Hard to believe that though. This is no different than any arbitrage so ... It will collapse or the arbitrage will collapse whatever it was arbitraging.

Edit: take your stack to your LCS to sell and see how "dead" the spot price is.

Aug 20, 2016 - 11:04am

miners above miners below

Great article !!! The other question. Where is all the gold and silver coming from to keep the ships afloat ? For many years I have researched and theorized what could be the contribution to these "just in time" extra ounces. Unfortunately, I have never heard one horns blow from the gold bug community. Have you ever wondered where the missing money (2+ trillion) from the pentagon mysteriously went ? Or what about the trillions that went undetected from Iraq, to name a few ? Where do these unaccounted dollars go ? The dark pools that fund projects above and below, maybe ? Let me start with the "below" theory. The first person that comes to mind is Phil schneider, murdered in January 17, 1997. He was a retired U.S. geologist, aero space engineer, as well as a structural engineer, designing and building underground bases. The tools and equipment to achieve such feats are a marvel within themselves. But, the big question. What happens to all the waste material when burrowing tunnels or constructing massive rooms deep below our feet ? Yes, some burrowing equipment heats up the rock to make a smooth glass finish on the tunnel walls leaving no waste material behind. But, other equipment and techniques require waste material to be expelled as you would see in the mining industry. There is a world unknown literally below our feet !!! So how is this waste material dealt with ? Are there gravity separators to capture each precious mineral into individual stock piles ? Is this how they further fund black projects ? I can't imagine our army engineers not taking these steps into consideration. Even a lame duck like me has thought this through...

The "above" theory has rumored over the years of mining asteroids, the moon, mars, and god knows what else. The evidence of such suggestions is profound but not unrealistic. Do you recall a few years back, 2 individual companies where asking for volunteers to commit to a 10 year contract to live and mine a asteroid ? What about all the mysterious photo's of the moon showing past or present mining operations ? Lastly, I leave you with the mars anomalies. Look up Randy Cramer and tell me there isn't some strange shit taking place on other worlds. Thank you for sparking my interest !!!

Aug 20, 2016 - 11:12am

Thanks Doc J!

I've been busy as heck this summer (as I gather you have been) and have not been posting as much. I've greatly enjoyed your contributions from the road via my phone, though! I hope the property demons are finally slain for you- don't know where that stands, but good luck selling if that is still to be done.

Aug 20, 2016 - 11:27am

Interesting stuff, Pining

Love the out-of-the-box thinking that challenges traditional assumptions. Well done!

Aug 20, 2016 - 11:54am

Nice work


Aug 20, 2016 - 11:58am

for us stackers

Neighbors Laughed at This Man’s Dam, but His House Is the Only One the Flood Didn’t Destroy


R man J
Aug 20, 2016 - 12:01pm

Dropped out of Turdville but now back in

For years I have avoided the miners and instead set, met and exceeded goals for phyzz. Following Andy and the Jackass advice. But Silver is still so cheap that it can't be traded for gold. Thus, 50/50 phyzz AG/Miners are my new strategy. i am guessing that others are in the same situation which would explain why silver eagles are not selling so well.

HUI is very cheap. Thanks Pining.

Aug 20, 2016 - 12:31pm

Only gold & silver miners are real banks!

Thanks P4, I think you & Murph are definitely on to something. Adam Hamilton had a nice piece on the HUI and XAU indexes that seems appropriate to repost here:


Only gold & silver miners are real banks! Mother Earth is the world's best vault!

Even the SNB has figured that out!

Edit: Sun's out here in the Pacific Northwest. Time to git out and play a round of golf... I'm loving my new titleist CB's! Thank you monetary metal miners :^)

R man J
Aug 20, 2016 - 12:59pm

Nice to see you again

Welcome back!

Aug 20, 2016 - 1:12pm


And yet, The War Party's sycophant media has always maintained USA/NATO = GOOD, RUSSIA = BAD!

This is precisely why we've posted the JBSFCs for the past 30 months.

Aug 20, 2016 - 1:17pm


I just forwarded that link to John Batchelor, too. He's always been very gracious in the past so I'm hopeful that he'll see it and perhaps pass it along to Professor Cohen.

Aug 20, 2016 - 1:57pm


Let’s think about this Hamilton paragraph for a few minutes:


Gold stocks were the best-performing stock-market sector of the 2000s by far. Between November 2000 and September 2011, the HUI skyrocketed an astonishing 1664.4% higher! Great fortunes were won by smart contrarian investors. Over that same secular 10.8-year span, the benchmark S&P 500 general-stock index actually lost 14.2%.


So, over 11 years, the miniscule buy & hold PM crowd enjoyed watching their investments grow sixteen times. SIXTEEN TIMES your money in 11 years.

That was that early leg – a nice steady climb. Now what’s in store for us nutjob contrarians on this next steeper ascent? Well, well, well... maybe TEN TO TWENTY TIMES our PM bets in the next 5 years? Maybe? Possibly?

Phyz-only crowd: if you simply take 5 to 10 percent of what you’re currently allocating to physical purchases & buy yourself a handful of quality gold & silver stocks, you could be looking at doubling your PM wealth (considering my rough math, presented above).

Five years from now these guesstimate calcs will turn out to have been quite conservative. Look, if the juniors can lose 90% in five years, they most certainly can climb TEN TIMES just to get back to where they were in 2011. So the 10x is just to get back to the starting line...

How high is high? Look UP. Look WAY UP. 20 baggers from today will be commonplace.

Aug 20, 2016 - 2:32pm

As for miners representation of the "price" of gold

Above R Man J examines his strategy with a mix of physical metals and miners. This sort of exercise needs the sort of thought that Pining and Murphy have done to decide what is the right price. The miners by themselves would be just a derivative of the the asset of gold.

I believe it's a healthy thing to try and fit the price of miners to find the true value of PMs. (I own both) Yet the price of the miners may be influenced by economic perceptions, and a reflection on history. The miners as a category were a form of shelter through the depressions and recessions of the 20th century. We also have monetary distortions in this economic environment. This can be a very difficult assessment as THIS TIME IS DIFFERENT.

Our friend SRSRocco has been telling us about the sudden (In the history of the use of gold as money or 5000 years, 50 years is sudden.) loss of the EROI. We have energy perceptions that are distortions on our economy as well.

There is another perception that we often run into that needs to be considered. Whe I examine Bitcoin or any other cryptocurrencies, the reference to value is the ever constantly shortening measuring stick of the US Federal Reserve Note. (FRN) precious metals are held in the same light to a varying degree.

When we speak of value as in; the time value of money or the value of a manure pile (a name for this community?) in the garden and such. The FRN is a distorting tool of thieves. We need some way of expressing value other than this tool of distortion. If the US dollar is backed by the "The full FAITH and CREDIT" of the USA then we're in trouble. It leads us to perception as the only thing making our currency even tradable.

What is the world image of the USA right now? What product are we bringing to the world? What ACTIONS can the USA be CREDITED for? Is there FAITH in how the USA will function in the future?

I find this whole situation to be very troubling. I think that the "price" of the miners can't be a proxy for the value of the precious metals because there are too many distortions. I find that a physical ounce (or 30 grams as China goes) has a value that will always be there, and the price of it never to be determined.

This is not a recommendation to buy.

*edit* I had to add a zero to the use of gold 5000 years, not 500.

Aug 20, 2016 - 2:53pm

Good thinkin'

Happy to have some thinkers on here (besides Turd that is). Thanks for the info and making the rest of us exercise the gray matter.

Dyna mo hum
Aug 20, 2016 - 3:33pm
Aug 20, 2016 - 3:52pm

Just another observation

Check out the gold to silver ratio with the prices of gold and silver on the debt clock. Bottom right.

currently sitting at about 9 or the ratio it is currently being mined at.


silver at $880.58 per ounce.

Don't know if these prices are related to fiat supply but the fact that it is at the mined supply is interesting.

Aug 20, 2016 - 4:15pm

SDR / Willie / Rickards

Willie talks about a gold trade note which replaces the dollar-world reserve currency ( which then becomes a national currency / which become greatly devalued )

Rickards talks about the SDR which replaces the dollar-world reserve currency ( which then becomes a national currency / which become greatly devalued )

With China on board with the SDR and the G20 meeting in China on Sept 4th and the launch date of the 5 currency SDR including the Yuan on Sept 30th , It looks like Rickards just might be right?

I think the up and coming Labor Day interview of Willie by Craig should be a very interesting one.

My questions to Jim Willie:

  • Jim, where does the SDR stand in relation to your idea of a gold trade note?
  • Are the two concepts contradictory?
  • Could both the SDR and GTN function together?
  • How do you feel about Gold and Silver stocks currently in light of the massive rise in price since Jan 1st?
  • Do you still believe the PM stocks are an unwise investment?
  • Do you think it would be wise for you to be nice and polite to your subscribers?
Aug 20, 2016 - 4:49pm

Today 's article and photos


How did you get Turd's permission to use his baby pic?

Looks like he's saying, " Don't give me that sh*t about COT, Mr . Harvard know it all ! "

Island Teal
Aug 20, 2016 - 4:57pm

How to best take advantage f this premise

Lets accept that HUI is the new Spot Price.

In that case what is what is the ideal combination of miners to best capture the upside?

Opinions ??

R man J
Aug 20, 2016 - 5:13pm


First Majestic is for silver bugs according to Jeff Christian. He probably was not recommending it when he said that. So I bought some.

Aug 20, 2016 - 5:50pm

AIJ..re your last question..

I would rather it be, please don't talk about your family anymore.

His audience is very familiar with the people around them in a very

different 'place' than themselves..

JamesC did a post elsewhere lamenting that.

I keep telling folks (friends, family, other) that a very very very small

portion of the people wanted the American Revolution.

Aug 20, 2016 - 5:57pm


If I knew that I would be living in St. Barths after 2011 and and not be trying to figure this out five years later.

Kidding aside, just got done reading the Zeal piece that Infometron posted above. A very simplistic combination would be

1) Buy a basket of GDX, GDXJ and SILJ to benefit from the big money flows that don't want to play individual stocks

2) Pick a basket of the best individual stocks. Some out of the HUI index. Since there's no benefit by buying all of them since the stocks in it are not actively purchased. If some are in the above ETF's that will accelerate the exposure to hopefully the best of the best. Maybe others of your favorites that are not in any of the three above or the HUI.

3) Small percentage of explorers and juniors not in any of number 1 above.

If you figure it out let me know!

Your mileage may vary. DYODD.

Good luck!

Aug 20, 2016 - 6:04pm

x22 report and V..cover the 'new' dollar differently than Willie

The Only Reason The Dollar Has Not Collapsed Is Because Of Fraud, Manipulation & Graft: 'V'
Aug 20, 2016 - 6:09pm

Danny B

There is a good reason the negative interest rates are never used

The FED has free money and is buying up every stock that threatens to drop in price. This has burned everybody who wanted to short stocks. When you have free money, you don't worry about price. Prices are set at the margin,,, whoever the highest bidder is.
" the Bank of Japan now owns over 60% of its nation's ETF market). Putting aside for a moment what an abomination this circumstance is to free and fair markets, having prices set by a central bank is a huge threat to price stability. Why? Because no one else can compete with an entity able to print an infinite amount of thin-air money at will. The gap between what a central bank is willing/able to pay vs the next marginal buyer is tremendous; so if the central bank ever pauses its buying, prices can drop precipitously."
The Marginal Buyer Holds The Pin That Pops Every Asset Bubble | Peak Prosperity

"The gap between what a central bank is willing/able to pay vs the next marginal buyer is tremendous" Levitation is quite expensive.

The Economist magazine is the mouthpiece of many of the self-proclaimed, "Elites". They have come to the conclusion that the Eurozone will fail. On course to fail | The Economist
There is a huge difference between the productivity of Germany and the productivity of the Southern Mediterranean States. They propose a wealth-tax on Germany to make up the difference. Something like the Treaty of Versailles but, without the war.

"According to Rickards, the next financial and economic collapse will be just another BIG BUMP in the road. Most precious metals analysts, Jim Rickards included, suggest the importance of owning gold to protect wealth during this next financial and economic calamity. Unfortunately, the most important factor they leave out is the “PERMANENT COLLAPSE DUE TO FALLING ENERGY PRODUCTION.”

Energy is the master resource. Peak cheap oil is a fact of life in the 49 states. When our $ 45 billion a month trade deficit becomes unsupportable due to the credit collapse, we will import a lot less oil. It remains to be seen where the price of oil will settle in after international credit has collapsed.

China exported massive price deflation in labor and manufactured goods,,, also, in some commodities. This has led to a huge deflation in interest rates. The Financial Times is another "elite" mouthpiece. This is their observation on negative interest rates.
"If negative interest rates spread to the wider economy, S&P said it can cause a shift towards a “cash-only economy”,
"Using Japan as an example, it said negative rates have not behaved as intended,"
"Mr Kingston said: “Negative interest rates were once considered by many economists as a radical strategy or even a mathematical impossibility, but some of the world’s most significant economies are now turning to negative interest rates to arouse moribund economies.

“However, moving to a negative rate environment, in every circumstance that we’ve looked at, is a clear sign of desperation "
Negative rate moves ‘clear sign of desperation’ - FTAdviser.com
"list of potential economic damage from these policies substantial.”

Peak cheap oil is behind us.
Peak credit is behind us.
Peak wages is behind us
Peak GDP is behind us.
Peak employment is behind us.
We are the high-cost market trying to maintain our former standard of living by borrowing to buy $45 billion a month of oil and trinkets. We are 4% of the world's population. Our entire system depends on levitation from the FED.
What could go wrong?

boomer sooner
Aug 20, 2016 - 6:41pm

Fed Facebook page

Can someone with an account ask them their stock picks for the next week?

LCS had some carded singles (one gram) AU bars in stock. I figured I would play along with the Chinese, added a few. Spot +$5 seemed pricey tho.

Aug 20, 2016 - 6:46pm

Why Gold Is Going Far Higher

Why Gold Is Going Far Higher in 6 Charts

by Stephen McBride, Mauldin Economics, Value Walk:

Asset prices are at all-time highs around the world. Since 2008, assets under management have increased by a whopping 43%. The reason? Institutional investors have been taking advantage, gobbling up all they can get.

But while institutions have been on a buying spree, there is one asset they have neglected.

And, best of all, there’s no risk attached to owning it.

Read More

Aug 20, 2016 - 7:15pm

Security researcher accuses

Security researcher accuses Microsoft of ‘sneaky data mining’ in Windows 10 that sends encrypted data to Microsoft every 5 minutes

investmentwatchblog.com / Submitted by IWB, on August 20th, 2016

Ah, you can never get enough paranoia nowadays, can you? Security researcher Mike Patterson — founder and CEO of security analytics organization Plixer — says Microsoft’s Windows 10 sends encrypted data from your machine every five minutes, and there’s basically very little you can do to stop it.

Even when he opted out of everything he could find, regarding data transfer, the OS still continued to do it. The weirdest part about it is that you can’t really determine what is being sent. The content was encrypted so that it is impossible to know what’s going out, essentially hiding this information from the end-user.

Patterson also said he discovered a group policy feature called Allow Telemetry, which determines how many telemetry details are being sent back to the company. The only way to eliminate this, according to Patterson, is to get Windows 10 Enterprise. Or, you can switch to another OS, I guess.


Aug 20, 2016 - 7:20pm

Kimble chart


This confirmed my gut instinct to start diversifying into miners. I only have a small amount to risk (I think only invest what you are willing to lose in sharemarket) so I am concentrating on Aussie producers & late stage juniors. No debt & money in the bank type of operations. GoldSilverdata.com has confirmed all but 2 of my original picks (still not on the radar over there). Worth the $$ & suspect he is a turdite. If not he should be


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