NFTRH+; another indicator to the inflation trades

With respect to the previous update, let’s also take a look at the Silver/Gold ratio (SGR) which, as a “metallic credit spread” along with its opposite twin, the Gold/Silver ratio, can indicate market liquidity and by extension, a positive environment for the various commodity focused inflation trades when rising.

SGR is attempting to form a low here within its downtrend. It’s no great shakes, but…

…the longer-term view shows the ratio, while in an ugly pattern, at a level that has been a decision point for various support/resistance tests over the last few years. A couple thoughts on ratios…

  • I would not place much importance on the ugliness of the pattern that has formed in 2020-2021. It’s a ratio after all and patterns all too often fail to play out in nominal markets/stocks let alone ratios.
  • By extension, some may not validate support/resistance on a ratio, but I would. I believe the varied inputs that go into a ratio are themselves a less visible, but still measurable factor.

At the very least what we have here is a picture that is intact above support and thus life for the inflation trades by this macro indicator.

For some reason Trading view does not show the actually numerical ratio. So let’s drop in the Gold/Silver ratio (GSR) showing the mirror opposite, whereby if GSR hold below the 82 area the situation is intact for the inflation trades. If not, the market’s recent liquidity issues could worsen.