An update to provide a view of the cyclical, pro-reflation metal (copper) vs. the counter-cyclical risk ‘off’ metal (gold), and also the Silver/Gold ratio, which as we know hit our upside target yesterday. These charts give us some perspective on the status of the macro at this moment.
Cu/Au maintains its up channel from the March disaster but has pulled back from the down trending SMA 200, as would be expected. It is time for Cu/Au to either fail and raise a warning on the entire global reflation trade or to regain its composure and rise anew. If it were to take out the SMA 200 and hold it we’d bring forward a view of a real global reflation sooner, rather than later.
Ag/Au hit its high of last September and as at that point is now dangerously overbought (see RSI at bottom). It is also painting a similar red candle this morning as it did during the September event. We should remain aware that this target does not need to be a stop sign if indeed the macro is changing from deflationary to inflationary, but our point here is to realize that the situation is at either a limit or a gateway to a different macro view than the disinflationary/Goldilocks one that has held sway for years.