Gold vs. Commodities

The signals of gold vs. other assets and markets have become so important to financial markets over the last year (hello Macrocosm, July 27 2015) that I have created a standard segment in NFTRH called ‘Gold vs.‘.  The segment regularly checks up on gold vs. stock markets, currencies, bonds and of course, commodities.

Here is the state of the latter.  After the chart I’ll summarize some of the market signals.


  • Au-CRB is in a long-term uptrend.  This uptrend has been in place since late 2014, when not coincidentally, volatile market disturbances started to erupt.  The uptrend is in place, indicating a generally counter cyclical global atmosphere.  If gold breaks down vs. cyclical CRB the ‘inflation’ play would drive hot money out to other areas beyond gold mining.  If not, the favored gold mining fundamental backdrop will have held up.
  • Au-Oil took a big hit and we have theorized that this could drag fuel intensive gold mining operations’ fundamentals for Q2’s reporting season.  Aside from that, it is a counter cyclical asset vs. cyclical one.  Au-Oil is fairly neutral but still clinging to an uptrend from 2014.
  • Au-Industrial Metals has been dinged just a teeny but remains in a firm uptrend and on a counter cyclical trend, one might assume after the ‘China build out’ hype wore down as they transition their economy.  Copper still looks to me like it’s got an outside shot at $1.50/lb. after all.
  • Au-Agricultural is near the top end of a sideways range.  Agri is a bit of an outlier and we’ll refrain from pretending much meaning can be drawn here.
  • Now it starts to get interesting, as Gold-PALL is breaking down (1.5 weeks ago NFTRH 403 went bullish on PALL).  What Beuller, may I ask was the PALL-Gold ratio to us in Q1 2013?  Anyone?  Yes, a confirming indicator of an economic up cycle to go along with the Semiconductor Equipment sector.  What has been the main recent theme here at this site and in its resident market report?  Anyone?  Yes, the Semi Equipment sector.  Maybe the world ended in June and the SEMI book-to-bill has tanked, putting the bullish view in Palookaville.  But maybe it continued strong and maybe the confirmer, PALL-Gold flipped on its head to Gold-PALL, is going to break down and join Gold-Silver in signaling market relief, if not inflation quite yet.
  • So last but never least, Au-Ag.  Gold’s breakdown vs. silver potentially signals a coming environment where inflationary effects will be taken seriously.  But another message of gold (counter cyclical) dropping vs. silver (less so) is as an early indicator on a benign atmosphere for financial markets.  How long will it last?  That’s a whole other analysis.  We have a rough blueprint but it needs to be managed weekly.  This was one indicator that helped me cover all shorts and advise bullish on the stock market when it refused to take the bait during the Brexit hysteria.  Silver continued firm vs. gold and now they are both taking the correction they have needed.  I swear if I see one gold bug trying to work people up about manipulation (it’s everywhere)… Gold-Silver is a market signal and it was there for everyone to see.

Macrocosm component Gold vs. Commodities was the first of our multi-asset, multi-index charts to signal a counter cyclical atmosphere amid global deflationary pressure.  It would also be a key to signaling future inflation issues.  This would be indicated by more gold ratios breaking down to join Gold-Silver and quite possibly, Gold-Palladium.  But in the interim the signal appears to be a gathering risk ‘on’ in the broad financial markets.  Risk ‘on’ does not mean risk-less.  Quite the contrary.  But that is a subject for another time as the process moves forward.

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