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Gold Miners: Dismissing the Inflation Bugs

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Below is a monthly chart of HUI telling some stories of the past.

  • The 2003 to 2008 bull rally ended with Huey’s “crown of thorns” as I used to call it back then. An H&S that formed at the end of a great inflationary phase in the markets.
  • The great crash of 2008 (Armageddon ’08) was completely deserved because as I’ve belabored for so many years now, you don’t buy gold stocks in any heavy and/or long-term way during cyclical inflationary touts as gold barely keeps up with mining cost commodities and other assets/markets. The crash of Q4 ’08 cleaned out the inflation bugs and it did so with great cruelty and relentlessness. Only when every last bug who’d come aboard for the wrong reasons was exterminated did the bloodshed finally end.
  • So who turned and burned first out of the ’08 (deflationary) bottom? Gold and then the miners, that’s who. They led the whole raft of commodities and stocks, which finally bottomed in March of 2009. Then another massive inflation trade ensued, before blowing out in Q1 of 2011. Then? What I called “Mr. Fat Head” formed as the first drop found support at 375, the sector rammed upward on a QE tout, then failed, taking out 460 on the downside and we proclaimed that was that. Welcome to the bear market.
  • Then years of a bear crash and grind took HUI down to Mr. Fat Head’s measured target, which was around 100.
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