The little bout of positivity in the inflation markets is enough to get me questioning my short position in DBC. Here is a chart of RINF (inflation expectations), as posted in the trade log, diverging bullish from the intermediate downtrending CRB index. I don’t know who’s off sides, inflation bulls or deflationists. But I don’t plan to find out with my money on the line because that money is paying decent income and is my default when my conviction about a position is less than firm.
Anyway, the Silver/Gold ratio would be in alliance with inflation if it were able to resume upward. It head faked below, and whipped right back above the SMA 50 and as such, still has bounce potential (within a major daily chart downtrend, orange SMA 200).
Or put another way the Gold/Silver ratio needs to fail its uptrend in order to reestablish a negative divergence to the US dollar and potentially set asset markets free to bull.
With the trend in the SGR down and in the GSR up, that is the major macro situation; bearish in the face of the oncoming FOMC. But insofar as short-term counter-trend potentials remain in effect for these two (they do), then market relief – including the precious metals – can continue.
So let’s keep an eye on the Gold/Silver ratio or if it pleases the eye, it’s would-be bullish companion, the Silver/Gold ratio for both short-term indications and longer-term ones.