The Breakdown in the XAU

I’m not exactly sure what this means, but I’m struck by the dramatic plunge in the Philadelphia Gold and Silver Index ($XUA). This is an index of 16 precious metal mining stocks.

Since October the XAU hasn’t merely fallen but it’s practically plunged off a cliff. This is especially surprising since the XAU tends to be somewhat sympathetic with cyclical stocks. Not this time. The cyclicals have been doing well.

Obviously gold hasn’t been performing well but the drop in the XAU has been very dramatic. I think in some respects the last few months have been a microcosm of the stock market of the 1980s as gold has fallen and paper assets have thrived. There seems to be a divergence within cyclicals as the commodity-based ones have lagged the heavy industry sectors.

Posted by Eddy Elfenbein on March 7th, 2013 at 11:31 am

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