-- Posted Monday, 14 October 2013 | | Disqus

By It's a Mystery

There continues to be a great deal of bad information trotted out by analysts in the gold community that somehow the miners are irresponsible, cannot control costs and were overvalued.  The problem is all of the analysts are wrong.  Gold miners trade almost in lockstep with the yen/dollar cross(FXY). When the yen was wiped out the first half of 2013, GDX started a waterfall decline. The algos controlling this ETF are simply on auto pilot.

The chart above shows the yen/dollar cross in the black line (FXY). The dotted line is a mining royalty company. There are several that trade publicly. Royalty companies do NOT mine for gold. They might have two dozen employees. They are in simplistic terms a bank. So exactly how does that chart dovetail with the mantra repeated ad nauseam about how poor management is in the gold mining sector?

OCT 2008 through OCT 2010….GDX gold miner ETF overlaid FXY (Yen versus Dollar)

OCT 2010 through OCT 2013….GDX gold miner ETF overlaid FXY (Yen versus Dollar)

From the bottom of 2008 until today as represented in the two charts above GDX and FXY are attached at the hip. That is an undeniable fact. It is the only sector in the broad market that has seen multiple destruction over the last two years. Analysts have invented every reason under the sun to explain the performance when in reality there is only one.

Finally, we have the S&P 500 overlaid with the $/Yen or the inverse of FXY. This is why stocks have marched relentlessly higher and PE multiples are reaching the stratosphere yet again.

So what to expect?  This is $/Yen pictured below and the converging lines resolve at the end of October or very early November. Look for any number of reasons to explain the large move that is about to occur in asset classes but know this: Your driver for them all is the picture below.

-- Posted Monday, 14 October 2013 | Digg This Article | Source: GoldSeek.com

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