Gold’s Macro Signaling vs. Commodities (and PM/Commodity Transvestite Silver)

With a full slate of broad market ‘internals’ indicators and gold stock charting in NFTRH 519, there was no time left for a gold sector fundamentals view (except for one big picture chart that I hope subscriber took note of). But it has not changed much from our last review.

Before getting to it from a commodity perspective (one among several angles the precious metals need to be viewed from), here is my favorite picture of gold sector fundamental conditions (because I see things in pictures more than in words). Gold’s Macrocosm ™…

As for the Gold/Commodities planet (which really should be larger), below is the view on the daily chart at today’s close. If the backdrop is inflationary gold can – and usually will – drop vs. broad commodities like oil and industrial metals. It will also lag silver.

This is the condition I often lament, whereby gold stocks rise in spite of fading sector fundamentals (i.e. costs of energy and materials rising vs. gold miners’ product). It can be good for some significant bounces (ref. Q1 2016) and who knows, maybe we’ll get a shift in the fundamentals along the way as the risk ‘on’ cyclical world springs more leaks. But we are currently using technicals as opposed to fundamentals, to manage the gold stock sector bounce.

As of now, the signaling remains inflationary as gold has dropped or is dropping against most commodities… and importantly, silver. This chart illustrates a pleasant condition when it’s relatively easy to throw a dart at the ‘resources’ trades and do well. But long-term US and global sovereign bond yields are going to decide what comes next. That’s a subject for another post. I am aware that some of the posts are getting a little more talky and/or confusing. But that is a function of the macro. I follow the macro.


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