alice

NFTRH; In-Day Snapshots of Market Risk and Gold Sector Funda

Gold vs. SPX (GLD-SPY) is breaking to new highs today.

gld vs. spy

It is not a coincidence that the above chart looks a lot like Treasury bond fund TLT, as they are both indicators of risk ‘off’.  Amazing, isn’t it?

tlt

Here is another, risk ‘off’ TLT (L/T Treasury) vs. risk ‘on’ HYG (Junk).  While nominal HYG has not broken down, this ratio does show risk creeping ‘off’.

tlt vs. hyg

Even gold vs. palladium is doing something similar, though it has not broken out.

gld vs. pall

The above pictures help illustrate why the gold stock sector would benefit from a counter-cyclical atmosphere.  When gold rises vs. most everything positively correlated to monetary and fiscal policy and the economy they would build out of paper and digits, the indication is waning confidence and improved cost of production per ounce metrics for gold mining.

Just an in-day snapshot with no particular bottom line.  I did by the way, consider myself fortunate in selling JDST (miner short) for a good profit this morning after having been negative at yesterday’s close.  Given what I see above (assuming it continues), while I might try a short here and there in the precious metals going forward, I am more inclined to manage risk with cash as opposed to shorting precious metals vehicles.  I’ll continue to short other areas if/as applicable but the default will be cash during this period of instability and potential change.

A final note; I have no idea why the junior miners (GDXJ) were down so hard but the seniors (GDX) were actually positive today (have not had time to go searching for answers).  If you do, or have theories, I’d be all ears.