It has become axiomatic, for good reason, that the mining shares tend to lead the gold price whether they are moving higher or moving lower. For whatever reason, the connection is fairly solid and has been for many years. That being said, the combination of a deteriorating chart for the metal and the fact that the ratio ( HUI to Gold) is rolling over, does not bode well for gold at the moment. Take a look at the following chart noting the HUI/Gold ratio and comparing that to the Gold price ( dark blue line). Can you see the very close connection? You can almost lay the gold price atop this ratio and see where it is generally headed as the lines follow each other quite closely.
This post was published at Trader Dan Norcini on September 4, 2014.