HUI Retreats from Resistance

1. Looks like the HUI is retreating from resistance. That makes sense to me. As I mentioned, the fundamentals are not optimal at the moment for a great Gold advance and the mining shares have been underperforming Gold, which is often not a good sign. Sentiment has been getting pretty bullish recently as well, perhaps too bullish. 340 is first support on the HUI, but if it can't hold that, then I think we will see a more pronounced correction, with Gold retreating back to $640 or so. That might provide a good buying opportunity. I'll be watching the Gold/XAU ratio closely as well. It's at 4.74 at the moment, which is fairly high. Above 5.00 and I believe it's just a question of time before we get a reversal--though ideally, I'd love to buy back in between 5.10 and 5.30. actually, I'm hoping for a nasty sell of now that I've been out of the miners for a few days. Looks like Andy and my patience may have paid off after all.

2. In company specific news, the usually snake-bitten GSS, which was actually one of the few gold miners companies that really shone recently, is getting killed today after announcing a secondary offering. It's down almost 8% today. After the chart repairs the damage, I think GSS should be a good bet. They've been coming out with fairly good news recently and seem to be generally turning things around. I'll have to get Tom's comment on the latest announcement. EGO, another strong performer recently, is also slammed today after announicng that its merger talks with Centerra are over. down 6%.

3. SA and IAG on the other hand, are trading up because of positive announcements. SA announced that a study of its Mitchell gold-copper discovery has confirmed a major new resource which may have significant expansion potential. At the moment, they estimate that Mitchell, which is one of their two main properties (Courageous Lake being the other) has an inferred resource of 13.1 million ounces of gold. SA's CEO, Rudy Fronk states in SA's press release today that "We could not be more encouraged by our prospects for value creation in 2007." Of course every CEO is likely to say that, however, I think SA's optimism may be justified. IAG is up on the announcement over the weekend of a a substantial increase in gold reserves and resources at its Rosebel Gold Mine in Suriname. KBX has also been strong into the general selling.

4. Volume is now coming in fast and furious on GDX during the last 30 minutes of trading and that's not a good sign.

5. Goldcorp (GG) announced the sale of two mines today to raise $300 million in a cash and stock deal. One of the two to go was the underperforming Amapari mine in Brazil. The Amapari mine was a money loser for GG, operating as of September 30 at a cash cost of $538 per ounce. Looks like GG is continuing to raise cash for the development of the Penasquito mine in Mexico. UBS lowered its target price on the news for GG, noting that the consideration for the mines, which also included $100 million in the shares of the acquirer, was below their valuation for the assets. GG is underperforming the HUI today, down 3.23% right now.

6. Lots of company specific news today, however, on the geopolitical front, it's worth noting that the troubles in Somalia are not yet over, with attacks increasing recently. I still think that area may develop into an Iraq-type of situation and it is, after all, adjacent to a major oil shipping route. so this is a development that bears watching.