gold stocks ready for a big rally, page-4

"The rise in the price of gold with a simultaneous fall in the price of crude oil, is lowering input costs for mining companies at the same time the price they are receiving for their finished product is rising rapidly. That is a surefire recipe for increased profitability moving forward. Given the fact that one of the arguments against buying the miners has been that their input costs have been rising at the same rate that gold has been rising, this effectively kills that argument.

It does seem from the price action of today's session, that some of the market players are finally catching on to this. If even one or two of the major shorts in the gold shares begin covering in size, the resultant buying wave will take prices of many of these shares through technical resistance levels on their price charts, resulting in further short covering as the hedgies which foolishly overstayed their welcome and attempted to squeeze the last 20% out of an otherwise profitable trade, begin to get snared by their own greed.

A closing monthly push through the all time high marked on the chart should see the miners do some rapid catching up to the gold price and reverse the downward trend in the HUI/Gold ratio."

Dan Norcini at http://traderdannorcini.blogspot.com/2011/08/gold-to-crude-oil-ratio-indicates.html

By the way, despite what Rowingboat is telling us - and suggesting that gold shares will continue to underperform gold - the chart above clearly indicates that the HUI INDEX of GOLD SHARES HAVE SIGNIFICANTLY OUTPERFORMED GOLD, rising from around 36 to 600. That is a percentage rise of 1566% and is equivalent to gold rising from US$250 to US$4,166.00.

After a tough 3 years, the strong outperformance of gold shares to gold could well be ready to resume imo.