Although it seems like the precious metals sector has experienced another down year, the HUI index is still up 48.6% from its 12/31/15 close and it’s up 65% from its low on January 19th this year.
The technicals in the gold market never been set up better than they are now for a contrarian move higher. On the assumption that gold closes on Friday lower for the week than last week, it will mark seven straight weeks in which gold has closed lower on a weekly basis. This has never happened before.
The premiums for physically delivered gold in China have never been higher. Egon Von Greyers, in Switzerland, reported in his latest King World News interview that there are reports that Swiss refiners have been paying a premium to buy gold. My suspicion is that the Chinese are willing to pay $30+ premiums to world gold in order to keep the supply from Swiss refiners flowing, which is why Swiss refiners are willing to pay premiums to acquire dore bars and scrap.
This illustrates the growing disconnect between the price of gold being paid by the markets in which physical delivery is a requirement vs. the price being paid by the paper gold markets (NYC, London) in which physical delivery (i.e. removed from the exchange and received into private hands) is highly limited, if not outright discouraged or considered a peculiarity.
The above analysis is an excerpt from the latest issue of the Mining Stock Journal. In this issue, I present several technical indicators which suggest gold is poised for a big move higher. The mining stocks have been telegraphing this since late November – I detail this point in the MSJ
Dave Kranzler spent many years working in various Wall Street jobs. After business school, he traded junk bonds for a large bank. He has an MBA from the University of Chicago, with a concentration in accounting and finance, and graduated Oberlin College with majors in Economics and English. Dave has nearly thirty years of experience in studying, researching, analyzing and investing in the financial markets. Currently he co-manages a precious metals and mining stock investment fund in Denver and publishes the Mining Stock and Short Seller Journals. Contact Dave at dkranzler62@gmail.com.
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