Technical Analyst Clive Maund shares a chart analysis of all the HUI index constituents.
On Wednesday of last week, the 12th, the precious metals (PM) sector broke strongly higher in response to a dramatic plunge in the dollar, as expected and predicted on the site in the article PM SECTOR update – REVERSING TO UPSIDE posted on the 3rd of this month. This breakout is believed to mark the start of an important and sizeable intermediate uptrend in the sector that should at least lead to very worthwhile gains and, depending on how things play out, could lead to spectacular gains, as the dollar is vulnerable to an unprecedented decline due to the fallout from its unfolding loss of global reserve currency status.
Because the fixed costs affect all larger gold mining companies, the rising gold price tends to benefit all of them simultaneously, which is why they all advance higher like a flock of sheep moving together.
While some junior PM mining stocks can and will make huge gains on the back of the expected major uptrend, the more reliable way to play this uptrend, especially for those of more limited means or for whom safety is more important than the prospect of massive gains, is by investing in large and mid-cap gold (and silver) mining stocks.
This is, of course, because large-cap gold mining companies are more established and stable and thus less likely to fall victim to the vagaries that frequently afflict juniors. Because their costs tend to be fixed, the biggest determinant of their bottom line profits is the gold price, and when gold prices rise significantly, the extra revenue generated feeds straight through to their bottom lines.
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This is why, when gold prices trend higher, the biggest gold stocks tend to reliably trend higher too, and because of the high fixed costs, the gains made by gold stocks leverage the gains made by gold itself, which is why they are such attractive investments when gold trends strongly higher in the manner that is expected shortly.
As we can see, the HUI Index has had a normal correction over the past couple of months back to the lower boundary of the large uptrend channel shown, with the correction taking the form of a bullish Falling Wedge that presaged a new uptrend.
Because the fixed costs affect all larger gold mining companies, the rising gold price tends to benefit all of them simultaneously, which is why they all advance higher like a flock of sheep moving together, as alluded to in the article posted on the 3rd, in which Royal Gold and Victoria Gold were highlighted as looking very attractive. This is not to say that you shouldn’t go for selected juniors too, but the larger golds that we are looking at here are considered to be bedrock material for a PM stock portfolio.
The companies whose charts are presented below are the constituents of the HUI GoldBUGS index. The XAU Gold and Silver index is not considered because it includes big silvers, which we are going to look at soon in a separate similar article. A 1-year timeframe has been selected for all the charts because it shows the major uptrend that is still in force back to its origins back in September through November of last year. The constituent stocks are presented in alphabetical order. Due to the number of them, commentary, apart from what is written on the charts, is of necessity brief.
The logical point for us to begin is, of course, with the chart for the HUI index itself, which does not not have volume data. As we can see on it, it has had a normal correction over the past couple of months back to the lower boundary of the large uptrend channel shown, with the correction taking the form of a bullish Falling Wedge that presaged a new uptrend, as was the case with a good number of individual stocks too.
Moving on now to the constituent stocks of the HUI index, we start with Agnico Eagle, which presents a clear and straightforward technical picture of a stock resuming its larger uptrend after a normal correction.
The technical picture for Anglogold Ashanti is especially clear and orderly — it hasn’t quite broken clear out of its corrective downtrend but should do soon.
While at first sight, the chart for Augusta Gold does not look anywhere near as positive as that for most of the stocks in the HUI index, if we look more carefully, we can see that it is now completing the Right Shoulder of a Head-and-Shoulders bottom that on shorter-term charts is a clear and fine example of one of these patterns and you may recall that we bought it down in the Head of the pattern.
If it succeeds in breaking out of the larger downtrend channel shown, as it should, a sizeable uptrend will be in prospect.
Although Barrick’s larger uptrend is not quite as robust as some of the other stocks in our list, we can see on its chart that it is already “on its way,” having broken out of the corrective downtrend and completed an intermediate base pattern above the lower boundary of the big uptrend channel and is now embarking on a significant intermediate uptrend that could see it ascend to the top of the big channel and perhaps higher depending on what unfolds.
BVN has been in larger corrective phase going back to last November but started its new major upleg earlier than most stocks, following the low late in May, and looks like it is limbering up to take out the strong resistance level shown, and given the now positive outlook for the sector over coming months it shouldn’t have much trouble overcoming it and of course, once it does, we can expect its rate of advance to accelerate, taking it to the upper boundary of the large channel as a minimum objective.
Last week, after completing an intermediate base area above the support of the lower rail of its major uptrend channel, Eldorado broke higher to commence its next major upleg.
If it ascends to the upper boundary of this channel again, considered very possible, it will result in worthwhile gains from here.
Gold Fields is looking really strong here. Last week it broke out of the corrective downtrend that was notably shallow compared to the powerful upleg that preceded it, so the larger uptrend appears to be accelerating.
This is bullish and means that the next upleg now starting is likely to be big too.
Harmony presents an especially pleasing picture of a fine and orderly uptrend with the next major upleg just getting started. The one disharmonious aspect is the weak Accumulation line up to now.
However, given the favorable look of the charts for other stocks, it should move up with them, and ideally, the Accumulation line improves when it does.
Even though IAMGOLD made new highs in May, all of the action from the January peak looks like a running or upsloping correction to the powerful runup from late September through late January that saw the stock almost triple in value.
Such upsloping corrections are very bullish, and given the now favorable outlook for the sector, it means that another really powerful upleg is probably in the works that is believed to have just started.
Old Warhorse Kinross is looking pretty good here. The correction from early May to the steep recovery runup from the March lows has been shallow, and the price has already broken clear of it to start the next upleg.
This upleg should take it up the top of the large channel shown and possibly higher.
Newmont has underperformed the sector in recent months, and its larger trend remains neutral at this point, although it should continue to rally with the sector.
However, on opportunity cost grounds, it is considered best to avoid it in favor of the many gold stocks with more robust charts.
New Gold is looking good here. Its robust breakout from its corrective downtrend channel last week took it well clear of this channel, and it is now on course to run at the top of the large uptrend channel shown, which will result in good gains from the current price.
Royal Gold is one of the two large gold stocks that we went for a couple of weeks ago (three if you include Augusta Gold), the other being Victoria Gold which is not included here because it’s not a constituent of the HUI index.
Royal Gold makes quite big percentage gains in a relatively short space of time when it’s in the mood, and it looks like it’s in the mood now, having broken out of the corrective downtrend to begin a major upleg that should see it run to the upper boundary of the large uptrend channel shown.
With reference to the title given to this article that includes the phrase “happy days are here again,” some of you may be in the mood to celebrate, and you can join in by following this link to the original song “Happy Days Are Here Again,” although it is doubtful if even some clivemaund.com subscribers are old enough to remember when it was first aired.
Posted on CliveMaund.com at 3.38 pm EDT on July 16, 2023.
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CliveMaund.com Disclosures
The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maund’s opinions are his own, and are not a recommendation or an offer to buy or sell securities. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund’s opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction.
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