Gold/Silver ratio indicates waning market liquidity
Since its fellow rider, the much reviled US dollar, is also still in rally mode the implication of the Gold/Silver ratio ticking a new high for its cycle is a negative thing. The negativity usually starts, handily enough, in the precious metals. Then if the 2 Horsemen keep riding their traditional route the liquidity drainage hits commodities and resources. Then come reflation-sensitive stock markets/sectors and finally, maybe even Tech and Growth if we do not have an extended Goldilocks situation like 2013-2016.
Here is the GSR ticking its new recovery high today.
And what the heck, let’s toss in the other rider. USD (DXY) has broken back above the neckline of its bullish (but still only potential) inverted H&S. We’ve been tracking these two in NFTRH for many weeks now as thing 1 above put in a base and thing 2 below made a higher low.
Bob Hoye calls the Gold/Silver ratio a “metallic credit spread” for a reason. And that reason is to have signs in hand about liquidity/non-liquidity and inflation/disinflation/deflation. By this account the destruction in gold and silver that’s got the bugs’ panties in a bunch was in the cards. Now let’s see if the damage fans out elsewhere, assuming the 2 Horsemen are not repelled soon.
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