Sunday, August 21, 2011
It's like Natalie Portman and Mia Kirshner showing up at my front door wearing slave collars and carrying a bowl of Ecstasy
To me, $HUI looks toppy right now, because it has been stuck in a range for a week, and needs to break over 580 before it begins to look positive from here. Ritholtz says that stocks don't consolidate sideways - sideways motion is a top signal.
In fact, a broad market relief could be bad for gold miners as people quit the new fad of buying gold for hedging against fat tail risk. Conversely, a broad market collapse from here could also be bad for gold miners if people suddenly remember to irrationally dump gold miners like they've always done in past crashes.
But yeah, longer-term, I'd think the assumption probably is correct that $HUI's more likely to break above 610 than drop below 500.
What's scary is, goldbugs and gold-standard kooks are always wrong, to me; but in times like the present, they can begin to vaguely resemble someone who's right. Trust is the foundation of markets. When banks and governments utterly lose trust, like you can see in the equities & CDS & interbank lending in Europe right now, then money's going to go to something else. It's already been rushing into USTs. It's also been rushing into gold. I suspect it's also rushing into silver now too.
Um, gold miners essentially print free money, don't they?
A hedge fund guy manager I was reading/listening to last week (might have been on Marketwatch's or Bloomberg's morning podcast, dunno) said his response to the broad market collapse was to go long gold miners. My god, it felt so creepy hearing that on a mainstream podcast. And he's not one of the goldbug/Ron Paul/ZeroHedge crowd, he's a "normal"!
That tells me we're about to get our most evil and perverted fantasy come true: we'll make money on gold miners.
It's like Natalie Portman and Mia Kirshner showing up at my front door wearing slave collars and carrying a bowl of Ecstasy. It scares me. It's not right. I can't say no, but I know it's wrong and I even feel dirty. Miners are supposed to suck and PM investors are supposed to get screwed. We're not supposed to win.