For those who have been following our analysis of this sector, you will know that we have been tracking an Elliott Wave count suggestive of a move down to the low $1,200 region in a large B-wave triangle, or a move to $1,109 in a c-wave that would finish the correction against the move up that occurred in 2016. The move up in gold that occurred in June invalidated both of these potentials, and we can now say with reasonable authority that there is a high probability that the low established in August 2018 won’t be seen again before, at a minimum, higher levels are seen first. However, there are some issues that raise questions about what is both immediately forthcoming and may be playing out long-term for the sector. To use an aircraft pilot’s analogy, the sector is not firing output from all cylinders, and as such there is good reason to exercise caution in one's approach to this sector. For those speed readers among us who pick and choose certain remarks and then run with them, please don’t cling to this statement by concluding that we are not bullish the sector - which we are - but rather take it for what it's worth and keep your approach and expectations real, and then position appropriately in the context of the opportunity, risk, and the knowledge of other opportunities presented by other sectors. Said differently, don't hang your future entirely on this sector - diversify your risk exposure.
To support what I mean, let’s consider a few of the cylinders that are failing to fire. While gold has formally taken out its 2016 highs, silver is currently closer to its 2018 low than the highs it made in 2016. In fact, the gold:silver ratio, which represents the number of ounces of silver one can buy for the same cost as an ounce of gold, is presently at 93.75, which is in the region of the highest it's been 1991, and before that since 1941. In addition, see the weekly HUI Gold BUGS chart below. Precious metals miners have historically demonstrated a high degree of elasticity to that of the underlying metals - meaning when metals rally, miners rally more. However, miners are seriously lagging the recent run-up in gold. Compare the 2016 rise to the dismal showing from the miners sector in this most recent rally in gold, and it will be apparent what I'm saying.