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Clive Maund

Clive Maund

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports.

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Why The PM Sector is Now a Contrarian's Dream ...

Originally published August 9th, 2015.

In this update we are only going to look at one chart, because I don't want to dilute its impact by including anything else. There are many other charts supportive of a positive outlook for the Precious Metals sector going forward, which we will look at separately.

The chart we are now going to look at is the long-term ratio chart for the large cap S&P500 index divided by the XAU index for large cap gold and silver stocks. So that we can achieve a big picture overall perspective, our chart goes right back to the mid 80's.

SPX:XAU Daily 1980-2015 Chart

This astounding chart largely speaks for itself. The main point it makes clear of course is the extraordinary and extreme undervaluation of Precious Metals stocks relative to the broad stockmarket. This ratio is an amazing 9 times higher than it was at its 2011 lows! Another point revealed by this chart is that PM stocks are now much better value relative to the broad market than they were even at the PM sector low late in 2000, before the great PM sector bullmarket of the 2000's began.

Finally, the MACD indicator at the top of this chart has risen to a wild unprecedented extreme reading, which means one of two things is going to happen - either the broad market is going to drop hard soon, which we are in fact expecting, or the Precious Metals sector is going to rally, or both at the same time. Either way you are much better off in Precious Metals stocks than in the broad market.

 

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