If you are like me you may have had some measure of mental macro whipsaw recently as the short-term signals bounce from disinflationary/Goldilocks to inflationary and back again. Fairly annoying.
But this set of indicators, the Gold/Silver ratio (GSR) combined with the US dollar index, beg a cautious stance on the inflated macro, including – if history is a guide – on gold stocks (which get over-populated by inflationists) in the short-term. I hate to be negative on a sector that is so oversold (ref. BPGDM extreme) but traditionally a rising GSR pressures gold stocks much more often than not when rising in tandem with USD.
The USD index (DXY) is breaking upward from the technical bull flag noted in the last couple of NFTRH reports. USD has been ‘anti’ most asset markets in 2022. If it is ending its month long correction (bull flag) then that puts asset markets in harm’s way, especially those that are more inflation sensitive.
Adding to the case is the Gold/Silver ratio, which is the other of what I call the 2 horsemen of the (macro) apocalypse. Well, let’s tune down that hyperbole and simply note that when more monetary, less industrial gold out-performs less monetary, more industrial silver it’s an indication against inflation-driven market cycles.