This Correction In Silver And Mining Stocks Is Different In This One Way

I’ve been trading and investing in gold, silver, and mining stocks since 2002 and have seen many bull market cycles, bear cycles, and corrections in them all. This one that is happening now is a bit different than any I have ever seen before.

Let me show you why.

This is a chart of the HUI gold bugs/stocks index. I’m using it instead of the GDX, because the GDX didn’t exist yet in the 2000’s, so I need to use it to show you a historical comparison.

The big thing that is different is that while silver has had a dramatic exhaustion rally and intense pullback, some are calling it a crash, in the past few weeks neither the mining stocks nor gold have moved up or down like silver has.

In fact, towards the end of last week on Friday before the open silver made a new minor low, for this correction, while gold did not. The HUI simply got near it’s 50-day moving average and bounced.

The HUI/GOLD relative strength ratio also held up, as did the GDX/GOLD ratio.

So, silver is trading in a much more volatile fashion than mining stocks.

During past corrections, the mining stocks typically fell just as much or harder even than the silver price. This happened in all of the ones I can remember, including one more recently back in 2022, the last real big one.

In 2022, the GDX fell much more than gold, almost 50%, as the price of silver went from about $28 an ounce to $18.

This was the last big correction in precious metals and mining stocks until the big April 2024 breakout that launched this current bull leg. After this correction they all bounced and consolidated until that moment.

The point is - on this decline the mining stocks really haven’t fallen that much at all when you consider what the price of silver has done.

Again, in almost all corrections they would fall just as hard or harder than silver.

There were multiple corrections like that from 2002 until 2008.

To show you an example here is one from 2006.

During this decline silver fell almost 38% and the HUI fell over 50%.

Again, the mining stocks are trading much stronger now than silver.

This is a good omen for the overall precious metals market.

Why is this happening is the question?

The mining stocks don’t seem to think this is really the start of a major decline, but is simply a pause/consolidation period in this metals bull leg.

Another reason is that the masses really haven’t gotten into trading mining stocks yet, but have now gotten into silver trading in a big way.

What the Robinhood types crave is price volatility.

They don’t research what they buy, often don’t understand it, and just look for things that make big daily prices swings on their apps. That - and a guru prediction is what moves them.

It’s why they have loved Bitcoin over the past few years and some of big tech stocks like TSLA.

The silver market is less liquid than gold, so they are seemingly able to make it more volatile with their buying or selling. I have no doubt that there are now quick money daytraders trying to play the SLV ETF.

Take a look at the all of the ETF’s in the market as ranked by trading volume.

An ultra short silver ETF is number two on the list, while SLV is number 14. Many of these ETF’s are garbage as investments and only can be used for very short-term trading.

A DUST 2X bear mining stocks ETF is on the list.

So, the masses were trying to pile into short silver and mining stocks ETF’s Friday.

The big thing I want you to realize is that they are now trying to day trade the action in silver in a big way.

They would be better off just buying some gold and silver as investments, but a big segment of US traders are simply app traders who are pure gamblers.

And they are playing silver now.

When the JNUG and DUST ETF’s appeared after 2008 they were among the top ten most traded ETF’s by volume like this for several years.

Both ETF’s faded down to nothing over the years, having to do multiple reverse splits.

They are garbage.

-Mike