Cycle Analysis: Precious Metals and Energy Stocks
21.10.2022 – Why are we more optimistic about silver and gold than energy right now?
Where are we in the cycle for precious metals and energy stocks?
Let's start with this chart. It shows the HUI Gold Bugs Index (gold stocks) compared to the XLE (energy stocks). The HUI is mostly large producers like Newmont, Agnico, etc. So rather low beta. We have already seen the first big outperformance of $HUI to $XLE. The fractal fits perfectly with the performance from '00 to '03. The decline also fits perfectly. Take a minute and look at the similarities.
In 2005, we hit the bottom of the HUI vs XLE, about 630 days after the peak.
So what followed after that low? It doesn't look spectacular on the HUI/XLE chart.
But if you look at what the HUI did from '05 to '06 in just one year,
it was pretty crazy. In about 12 months, the HUI went up 140%.
Silver also started its next uptrend in that exact time cycle, gaining 130% in 12 month.
If you look at the HUI/XLE again, you can see that the fractal
that is happening now is much more violent.
We are much more overshooting to the upside and
now much more overshooting to the downside.
So the counter trend move in the HUI/XLE that we're expecting now could very well be much more violent. Imagine what silver juniors mining stocks could do if we repeat that cycle. Great times ahead.
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