Historically, major gold exploration has occurred when the Dow was down and out. In this exclusive interview with The Gold Report, geologist and Exploration Insights writer Quinton Hennigh talks about the coming gold rush and what that could mean for existing companies.
by Streetwise Reports Editors, Gold Seek:
The Gold Report: While the NYSE Arca Gold BUGS Index (HUI) is up a bit from its May low, it is still lagging the price of gold and not living up to expectations based on the role it has traditionally played as a safe haven for investors. Are we close to a turning point in that dynamic?
Quinton Hennigh: Many investors and speculators are deservedly frustrated and dejected by the recent performance of gold and, more specifically, the gold mining sector. For many of us in this business these ups and downs are the norm; however, I see the current down as a critical one. Something is going to happen. It could be a month, six months, a year or two years from now. We can’t know. We may continue to see more pain in junior stocks until then, but a change is coming, and investors should take heed.
TGR: Where are we in the cycle now?
QH: Below is a chart of the Dow:gold ratio over the past 112 years. The peaks generally mark points when the Dow was running hot and gold was in the dumper. Conversely, troughs mark times when gold was riding high and the Dow was down. I have added a few interpretations to the chart. First, I projected this chart forward 25 years with a red line that I believe reflects a pattern that we are likely to experience, given a look back at history. Note that the red line bottoms out as the chart did in 1932 and 1980 and then slowly rises over the subsequent 25 years.