Interesting Gold/Commodity correlations to yields

Copper/Gold and Oil/Gold correlated with the 10yr yield

From yardeni.com, a visual representation of one implication of the Copper/Gold ratio, which I often make a big deal about.

If the Copper/Gold ratio has broken down for real (I believe it has) then yields are going to reverse, along with the inflation trades. That’s a theme I’ve had going for about a year now, but this picture provides another view. With the 10yr TIPs yield spiking and Copper/Gold in breakdown mode, the tardy Fed is chasing lagging indicators again (recall them spewing that ‘transitory inflation’ garbage, which they finally abandoned as the bond market tightened the screws further).

Now our inflation fighting heroes are over doing it to the hawk side. Because they are looking at things like the red line above. But this is a breakdown in Copper/Gold until proven otherwise, and its implication is for a reversal of the inflation hysteria.

Oil/Gold is well correlated with the 10yr Treasury yield.

When you consider that WTI Oil/Gold is below its daily moving averages and thus, vulnerable, a breakdown here – if it follows through – would have negative implications on cyclical inflation trades and positive ones for counter-cyclical gold mining. So if declining bond yields imply declining commodities relative to gold, any wonder why we call gold mining counter-cyclical and why I dump on lazy influencer touts routinely leading their herds astray painting gold stocks with the inflation stick (or should I say shtick)?

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