Gold vs. cyclical and more inflation-sensitive markets

Gold’s ratios to cyclical markets continue to pivot

Just an updated picture of the macro pivoting toward what will be a positive fundamental backdrop for gold mining. The holdout continues to be the last inflated man standing, crude oil and the energy sector. While Gold/Oil is still pinned gold has made a move of the bottom vs. Energy stocks (XLE). That’s something, at least.

When gold mining cost structures improve (if these charts fully bottom and turn up) and as market sentiment swings toward the miners (Gold/SPX & Gold/DJW) and pending any ill-timed gold bug puking, we just may get the turn this summer. I hope so because I have several articles out there calling 2022 ‘the golden year’. It seems to be in process.

Meanwhile, I am giving some breathing room to an interim Goldilocks scenario where Tech/Growth/Story stocks catch a relative bid on any bear market rallies to come. That is, if the decline in inflation expectations continues.

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This Post Has 2 Comments

  1. Barden

    It appears that the red and green arrows on those charts denote when the value being plotted (for example gold /WTI Oil) moves below or above the 50-day moving average, respectively.
    However, the number 50 seems rather arbitrary. How is it derived, and why not, say, 40 or 60 or any other number? It seems a bit like reading tea leaves to me.

    1. Gary

      Yes of course! It’s TA, therefore it is by definition reading tea leaves. If you’ve seen my Men Who Stare at Charts posts, you know my views on that. TA is a tool, not a be all, end all solution. Anyone trying to imply that is selling snake oil. That said, the SMA 50 is used simply because it’s the most watched average to an intermediate trend. If it changes, then legions of TAs will be all over it. In other words, you want to see what a majority are seeing (and reacting to).

      But as proof that it can work, look at the two top panels, gold vs. stocks. Break above the SMA 50, hard re-test and then a change to a new intermediate trend. It worked in that case. Ditto Gold/GYX.

      There is no finite guru prediction bullshit at this website. Just tools that help guide.

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