OASIS FORUM Post by the Golden Rule. GoldTent Oasis is not responsible for content or accuracy of posts. DYODD.

HUI is bullish. Period. A gap at 180 to fill? Sure, it can. Bullish. The gaps down lower? I don’t think so; not any time soon as they were part of the launch and were breakawaygaps that put Huey above its moving averages and changed its trend. Overbought? Yes, but less so due to the consolidation of the last couple of weeks.
 
That is what a bullish market does. It gets overbought, it consolidates, it gets chart nerds like me talking about gaps and then it takes a new step up. It is called momentum and it has entered the gold stock sector. Personally for mental health, I keep a view that the 170-180 support area could be tested (filling the upper gap) but you don’t want to be playing guessing games with bullish markets. If it goes bearish, it goes bearish. But right now it’s very bullish and it could just as easily rip higher.
 
I’ve added the Stochastic to show that it is bullish and as long as it remains above 80, HUI remains bullish. That’s simply the current daily chart technical of it.

 

Precious Metals

The Commitments of Traders (CoT) structure for gold is generally thought to be bearish on a contrary basis.
 
Sure, gold’s CoT is in a state where a significant pullback couldcome about. It is also in the state it would necessarily be in after a strong bull move and breakout from very notable resistance. It simply means that large speculators are very bullish and commercial hedgers – of varying flavors (banks, miners and sure, if the conspiracy theorists are correct, a few nefarious enterprises L) are on the other side of the trade, as they alwaysare. So the key question is not ‘who are the evil forces that want to “smash” gold?’but instead, ‘how long will the large specs be right?’



Well, from 2009 until well into 2011 the large specs were very right until they got wrong as Ben Bernanke finally unveiled (and count me as a conspiracy theorist here) Operation Twist with the intent of killing inflation signals and forcing the yield curve to stop steepening and begin a flattening trend that endured until 2019.
 
Bottom Line: We should follow the fundamentals and the technicals and leave CoT a distant third in managing the short to intermediate-terms in gold and gold stocks.
 
As for silver, it’s CoT situation (chart below) is not near an extreme and that leaves some room for a catch-up move and possibly a take over of precious metals leadership. Again, CoT is just one angle of a view into the workings of the precious metals but the alignments are in concert with our current expectation for silver to eventually take over from gold IFthe macro is to go inflationary. That’s still an ‘if’until it happens, but I like the states of the Au & Ag CoTs with respect to a future inflation view.
 
As you can see, silver has rallied just a bit and the CoT have shown increasing spec longs and commercial shorts. All normal. I think it is a positive that silver has been muted in price and in CoT relative to gold. It’s almost as if its in the weeds, laying in wait. And those of us who’ve been around a while know that’s not usually its M.O.



For now let’s realize that nothing has changed in the precious metals’ relationship as the daily chart shows.



Switching gears however, this…



The fact that gold stocks have been leading gold since the May breakdown (nice bear trap for gold stock bears) is a continuing bullish technical underpinning. What is also nice is that handle (bull flag) that extended from the top in 2016 to 2019. Ref. here the other monthly chart with a closer view showing a flag breakout in process. This monthly chart shows us that the ratio is attempting to take out the EMA 50, which tends to support bull markets and limit bear markets.



Gold (weekly) is in a normal consolidation as expected. But this simple chart tells what the plan will be if the 1350-1375 support zone holds. That support area was absolutely critical long-term resistance to be taken out, and now it is just as important as support.



What more to say about silver? A break of the trend line would be seen by those speculators noted in the CoT discussion, not to mention legions of chart jockeys, momentum traders, casino patrons, black boxes and eventually, Ma & Pa. In other words, as noted above “its in the weeds, laying in wait”assuming the bull case is correct (and that will likely be determined by what it does at the trend line. It sounds like a Catch 22 of sorts (“that’s some catch, that Catch 22”).



Here is what I consider the most important macro fundamental situation for the miners. As SPX has put on its move to the 3000 target, Gold/SPX ratio has pulled back. Logical and fine. But I state again, this must remain intact for a full bull sector view.



Dialing in to a gold mining sectorfundamental consideration, we see that the numbers about to be reported for Q2 will be the product of an environment where the gold/oil ratio was elevated. This chart was originally created to show gold stock under valuation, but HUI – in the context of a daily chart at least – has caught up and then some. In other words, it has already discounted whatever positives the rising GOR will bring.



Is that a caution point? Could be on the nearer-term, but the markets are filled with could-be’s. Taking a wider angle view the gold stock undervaluation (to this metric, at least) we’ve highlighted over the last couple of years is still fully intact. The gross under valuation began in 2014 and while not as gross now, is still well in place. What’s more, the Gold/Oil ratio is still in a long-term uptrend.