Is the HUI about to embark on a major rally?

We have been patiently waiting for the Gold Bugs Index (HUI) to take off to the upside on the back of record gold prices, however its performance has been sluggish at best and the rallies have been short lived.

Now, putting on our positive glasses there is an argument for some catch up play by the gold producers. Taking a quick look at the chart we can see, at a bit of a stretch, it looks as though the HUI has formed a number of higher lows, which is usually a positive sign on most charts. The RSI at 57.01 still has room to move to higher ground before becoming seriously oversold. The 50dma is close behind the HUI and the 200dma is also following along in support, so the downside should be fairly limited from this point.

Whether to pile in or not is still something that we are wrestling with. We do own a number of gold producers and maybe its just our lack of patience but with gold as high as it is we did expect the stocks to be moving up the gear box by now. We still have some 'opportunity cash' on the sidelines and are looking to invest, but you know just how stingy we can be when it comes to spending money.

You may also recall that we made a major change to our investment strategy last August when we reduced our exposure to such gold producers as AEM, AUY, etc, in order to increase our exposure to silver and the silver producers, in particular SLW. Since then gold prices have improved by around 25% and silver prices have been on a tear improving by around 130% and so we feel reasonably vindicated by this re-positioning of our portfolio.

Now, if silver has run its course for the near term look ahead, then maybe its time to go into reverse and move our cash back again. The silver market is still tiny even when compared to gold and the demand does appear to be relentless at the moment so we are staying with it.

We maybe trying to be a tad too cute by trying to pick such turns in the market so we thought that we would throw it over to you guys and gals, our trusty team, in order to get your input – so come on and make an effort to fire in a few words, thanks, Bob.

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Over in the Options pit, our model portfolio has managed an average return of 40.85% per trade, 69 closed trades, 67 closed at a profit, or a 97% success rate. Average trade open for 42.32 days.




The above progress chart shows our performance when profits are re-invested, however, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.


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Comments

[J. Wendell Curtis]

Hmmm....maybe great minds think alike? As I read the article I pondered the possibility of buying SLW calls, since it is almost 10% off its high and the RSI is 52.

[Mark]

The price of silver has moved to new highs. Usually the prive of Silver Wheaton moves in lock step with Silver. This time Silver Wheaton has hardly moved. It is at around 43.20 compared to its previous high a few days ago of 47.60. Does anyonre have ant idea why Silver Wheaton's price is so sluggish?

[real]

op ex and change of management - but it does look suspicious to me....

[real]

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/4/16_KWN_Weekly_Metals_Wrap.html

interesting stuff here

[BeeThousand]

Also been wondering about the SLW sluggishness, as well as gold/silver stocks in general. One theory is that hedgies are short the shares and are fighting tooth and nail to keep from getting fried. Another is that shareowners are "calling a top" and selling rallies. If the metals keep powering higher, the stocks will eventually catch up. Timing it is the hard part:)

[BeeThousand]

Another thought as my coffee kicks in this AM... A Stewart Thompson article that struck home with me was to take your silver profits in physical gold instead of cash.