My view is that we are going to exit the deflation scare in favor of an inflationary/stagflationary future. Monetary and Fiscal policy bombs say so. The Fed’s printing of funny munny and politicians’ deficit spending will likely bring about damaging inflation eventually, not the kinder, gentler type we’ve had over the last few decades.
Silver would bottom and turn up nominally and vs. gold as a signal of an oncoming inflationary phase. It is no coincidence that the Silver/Gold ratio and nominal copper look a lot alike. There is bound to be a lot of grinding in the near-term because we are not likely to have such a quick deflation scare and proceed directly into readily observable inflation expectations. Markets may need to chop, grind and test lows in the coming weeks, but I think what is setting up is an asset market trade in 2020 and beyond, and that includes stocks in the right sectors.
Here are the silver/gold ratio and copper.
Obviously, a rising silver/gold ratio would come about with a rising silver price and we have noted that the breakdown below 14 may have been a head fake in month to get we chart watchers off sides. Here is the daily futures chart as of 9:38 US Eastern time. It’s above 14 and tested resistance at 14.90 before recoiling a bit. Click the charts for the full, clearer view.
Weekly chart for reference.
As mentioned previously, the monthly candle is what I am interested in for silver. While below 14 we noted that it would target the low 8s, but that if it were a whipsaw and the monthly candle puts on a tail and closes back above 14 it could be one of those dump and reversals that shake players out before a real bull leg. So far so good. The candle is above 14 and has a tail with a week left in the month.
Finally, HUI, for a gold stock sector view. Here is the daily chart we used recently to project the bounce to resistance last week. Huey is back at it and that 200 to 215 area continues to be key resistance. It has filled all its gaps on this chart, leaving the one from 2016 as a bottom feeder’s fantasy for now. It’s hard to see it now dropping substantially after putting in such a hard correction. Indeed, I wonder if that was not a solid A-B-C correction. But HUI needs to take out resistance and the moving averages in order to prove that case.
I don’t know how close I’ll be with the markets tomorrow. I am going to NYC to extract a young person who is near and dear to me. I may leave after market hours but am not sure yet.
Stay safe out there all.