As we mentioned recently the decline of the US Dollar was accelerating and yesterday it returned to take tea with its 200dma and actually penetrated it to close at 82.49. The dollar registered a fall of 1.68% in a single day as measured against the basket of currencies which form the index.

Gold was a beneficiary and the gold bugs index also reacted in a very positive manner. The HUI which more or less reflects those gold and silver producers that are unhedged has started to respond positively with any move north by gold, which is what we need to see as for some time we have had very little in the way of leverage. The gold ETFs are partly responsible as they have sucked in an unbelievable amount of investors cash which may have been invested in stocks had they not existed.

Taking a micro look at the HUI we can see that over the last 12 days gold has managed a gain of 1.34% and the HUI has managed a gain of 18.13%, not a lot to go on but hopefully we can get back to a scenario whereby the mining stocks outperform the metals by a ratio of 3:1 or better. By the end of the year we want to see the HUI back at the 450 level and heading higher as gold takes out its previous high.

We are still of the opinion that silver and its associated stocks will outperform gold and the gold producers so make sure that your ‘metals’ element of your portfolio contains a few of both.

Sleep tight.

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