Gold Stocks and the Gold/Silver Ratio

Many gold bugs fail to understand the interplay between gold stocks and the Gold/Silver ratio.

Misconception: noun; a view or opinion that is incorrect, based on faulty thinking or understanding

It has never failed. After the blessed 2001-2004 period the “misconceptions” game took over the precious metals as silver took leadership over gold (2004-2007), gold under-performed many commodities and “inflation trades” and the HUI/Gold ratio topped and declined for a long dirt nap, in which it is still snoozing.

That was damage done to the gold mining sector’s internals (even as it continued to rise nominally) by a pervasive inflated macro that was working to the benefit, however moderately, of economies. The HUI/Gold ratio (HGR) declined as it should have.

The HGR and our 2001-2004 analog is an article for another day, and actually has been an article on previous days, March 7th and March 11th. If you would like some deprogramming from gold bug dogma circa 2004-2022 (I personally deprogrammed myself in 2004-2005), I recommend you read them.

As to the chart below, gold stocks (HUI) are once again rising in tandem with the Gold/Silver ratio. That is one indication of HUI rising with the gold mining industry’s proper macro fundamental backdrop. See Gold Mining Macrocosm Fully Engaged (April 4th) for more on that.

Silver has more cyclical/industrial utility than gold, is more inflation sensitive than gold and well, is NOT gold. It is a hybrid. Gold is monetary stability, anti-speculation and pro-insurance. A rock. Silver will have its time. But to this point, gold has outperformed and yet, unlike the majority of the 2004-2022 macro phase, gold stocks are in positive correlation with the ratio. Hello, 2001-2004 analog!

This is simply a picture of gold stocks in the proper “Macrocosm” doing what they should do, while silver under-performs. When silver does take up leadership over gold, whether for a short phase or a longer inflation cycle, you will know that while gold stocks would likely still be rising, fundamental purity will have been at least temporarily suspended.

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