A point I tried to make here on the site at the end of last week and in the weekend report is that I got excited, like a lab geek whose experiment finally worked or a bust out at the track whose horse finally came in. I was excited for two reasons, the data in the Semi Equipment sector and gold’s breakdown vs. silver. Two cross referenced indicators.
Below is the NFTRH chart that is the cyclical/counter cyclical arbiter. Before gold vs. currencies and long before gold vs. stocks turned up it did so against commodities, back in 2014 (it had long-since already turned up vs. silver). The recent decline in gold-oil was deeper than I expected, but it’s still (barely) on the counter cyclical theme. Then came strong Semi Equip data and finally, the breakdown vs. silver. Hence, the excited geek.
Also, see gold vs. palladium below? Speaking of cross references, that ratio provided one in January of 2013 when PALL changed trend vs. gold and joined the Semi sector in signaling coming economic firming. So far Gold-PALL has made a double top but not broken down. Add it to the mix of indicators. If gold breaks down vs. PALL it would be another positive indicator for the ‘inflationary growth’ theme.
But this is still a counter cyclical and bearish picture for much of the world and I have to remind myself of that. If gold’s breakdown vs. gold (Silver’s breakout vs. gold) is real, change (to risk ‘on’, inflationary) may be forthcoming (silver is early in turning up as it was early in turning down). But if somehow this was a whipsaw in silver-gold the counter cyclical theme would be fully intact.
Pending correction potential (when silver turns down it will likely turn down hard), that benefits the counter cyclical gold mining sector for all the reasons put forth many times in the past. If the macro changes to inflationary, the gold sector becomes just a part of a wider range of plays. So, has gold broken down vs. silver for real or as a whipsaw? Answer forthcoming.
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