“Slowly I toined, step by step, inch by inch…”
The Gold/Silver ratio finally turned, and then it burst upward to the underside of an important macro decision point.
With the US dollar also bouncing we have the 2 Riders of the Apocalypse doing as they’d do for a miniature liquidity event, which still appears to be in play.
But the “metallic credit spread” known as the Gold/Silver ratio broke down during the 2020 post-crash relief. The indication of that breakdown is inflation, among other things. Since inflation is the tool being used to promote economic reflation, the Gold/Silver ratio must not rebel and decisively break higher from this bounce in order not to fly in the faces of the fiscal (reflation) and monetary (inflation) authorities.
It may not mean much but look at how similar the massive decline after the 2008 financial crisis spike looks to the impulsive drop coming out of the Corona crash spike. I have been operating on a bias toward 2021 inflation, but work with me here and think about the question ‘who’s to say we have not already had the inflation with more liquidity destruction ahead?’
As a side note, a recovery and bull phase in the Gold/Silver ratio would dump you infernal inflation bugs out of the gold stock investor base. You’ll run away because OMG the inflation is failing! After the pain caused by that, the time would again be right for gold stock bulls.
Until the Gold/Silver ratio takes out the barrier shown above (and USD proves to be on more than a bounce of its own) 2021 inflation continues to get the bias on the macro view. But the 2 riders will determine the ultimate answer on judgement day.
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