NFTRH+; two HUI ratios, plus

A couple of HUI ratio charts of note.

HUI/Gold (GLD) ratio continues to hold up, T-minus 1 week to FOMC.

HUI/SPX ratio holds up as well.

With increasing signs of economic deceleration the question is if/when the Fed will decide that the economic damage to come will outweigh inflation fears. I think the Fed is a manipulative and downright damaging enterprise, but I don’t think they are stupid.

Forward looking indicators like 5-10yr inflation breakevens, and especially tanking manufacturing data should at some point start to weigh. The bond market is in its second day of picking up on that theme (bonds rising, yields pulling back). Obviously, follow-through is needed all around but if gold stocks continue to lead the metal and especially the risk ‘on, cyclical stock market, they could be preparing for the much anticipated counter-cyclical backdrop that would make them unique among asset markets.

One thing I continue not to like is that the miners are experiencing relief in tandem with commodities, so that could be a drag if commodities resume correcting due to failing economic conditions and/or inflation signals. Commodities are cyclical; the materials of physical economic build-out. Gold miners benefit fundamentally by the opposite, as gold attracts liquidity on a relative basis on cyclical deceleration.

If HUI/Gold is only constructive, DBC (commodities)/Gold is still flat out bullish. This means gold’s ‘real’ commodity adjusted price is not yet bullish, as we have been noting since mid-2020. Over time, if economic deceleration continues and intensifies, that should change. But as it, it has not.