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Why The PM Sector Is Now A Contrarian?s Dream

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Published : August 17th, 2015
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Category : Gold and Silver

In this update we are only going to look at one chart, because I don't want to dilute its impact by including anything else. There are many other charts supportive of a positive outlook for the Precious Metals sector going forward, which we will look at separately.

The chart we are now going to look at is the long-term ratio chart for the large cap S&P500 index divided by the XAU index for large cap gold and silver stocks. So that we can achieve a big picture overall perspective, our chart goes right back to the mid 80's.

This astounding chart largely speaks for itself. The main point it makes clear of course is the extraordinary and extreme undervaluation of Precious Metals stocks relative to the broad stockmarket. This ratio is an amazing 9 times higher than it was at its 2011 lows! Another point revealed by this chart is that PM stocks are now much better value relative to the broad market than they were even at the PM sector low late in 2000, before the great PM sector bullmarket of the 2000's began.

Finally, the MACD indicator at the top of this chart has risen to a wild unprecedented extreme reading, which means one of two things is going to happen - either the broad market is going to drop hard soon, which we are in fact expecting, or the Precious Metals sector is going to rally, or both at the same time. Either way you are much better off in Precious Metals stocks than in the broad market.


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Clive Maund is a specialist of technical analysis. His website, www.clivemaund.com, is dedicated to serious investors and traders in the precious metals and energy sectors. It offers no nonsense, premium analysis to subscribers. It is 100% subscriber supported, and takes no advertising or incentives from the companies it covers. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis. Happy trading.
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I do not agree with this article. TPTB have pushed down metals so hard that most miners are debt laden to the point of exhaustion. Sure, a few will win in any runup, but not many. Most are poorly managed and cash-poor with few funding choices. It is just too late, absent a huge (like 70%) rally in metals - ain't gonna happen soon. A lot of these miners are going to have a chapter 11. Then their stock price goes to nothing. Then they are a deal, perhaps, but the banks will fold them into their asset base for pennies to get the in-earth treasure at a fraction of value.

It's not hard to see their game, if you look.
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I do not agree with this article. TPTB have pushed down metals so hard that most miners are debt laden to the point of exhaustion. Sure, a few will win in any runup, but not many. Most are poorly managed and cash-poor with few funding choices. It is just  Read more
M. - 8/17/2015 at 7:02 PM GMT
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