A site reader/subscriber sent me an email with the simple subject ‘Two Horsemen’, with reference to the 2 riders and their current states. This prompts me to look into it.
Horseman #1, Uncle Buck, is still looking bullish. USD made a higher low in June, putting into question the series of lower highs and lower lows from February. A higher high to May above 98 remains the key to a full bullish stance on Unc.
Horseman #2, the Gold-Silver (live, GLD-SLV) ratio is again moving upward.
That is breakout territory up there as the weekly Gold-Silver ratio (yesterday’s close) shows.
Normally, the rise of the 2 Horsemen will hurt the precious metals sector first and sometimes foremost. Commodities too. CHECK.
But the equity markets have continued to gain the speculative bid as Biotech, Internets, etc. get the casino treatment and risk remains ‘ON’.
So for now, I think what is going on is that if it is inflation related, it’s getting hammered. It fits well with our theme that only when stock markets crack – fitting in an important piece of the puzzle – will the gold sector be ready to bull.
Goldilocks appears to be in play for now but here we recall that the strong USD had implications on earnings. Well, last I looked, USD was fairly strong. So if it continues upward it could be a factor in reduced earnings once again in future quarters. This in turn would bring on the preferable backdrop for the gold sector. Patience my friends.
