NFTRH+; a couple of important gold ratios

The nominal gold price is positive this morning and still trapped below initial resistance.

The silver price has retaken and thus far held the daily SMA 50.

The copper price has smashed back above its SMA 50, up stronger than either of the above as the bounce attempt from support at 3.30 grinds on.

Let’s take a look at the gold/silver and gold/copper ratios.

The GSR is furthering the ugly look we noted in this November 2 update. Not surprisingly its anti-market fellow, the US dollar, is also down in pre-market. From that update, this still applies…

The Gold/Silver ratio (GSR) is the US dollar’s companion in the market liquidity destruction game and as you can see, the GSR looks anything but stellar as it grapples with the uptrending SMA 200 again trying to hold that trend. If the ugly pattern plays out and GSR breaks down get ready for the theoretical potential of a strong and widespread market rally, likely including the precious metals.

and…

Such a macro party atmosphere would be in keeping with the mid-term election cycle’s positive history.

As does this, since the ratio has not yet broken down…

If on the other hand GSR holds up and USD bulls the outlook would be much darker, including potentially in the near-term, the precious metals even though this would eventually shake out as fundamentally positive, especially for the gold mining industry.

The Gold/Copper ratio is down big this morning despite gold’s rally. But is the ratio broken? No, it’s major daily trend indicator, the SMA 200, which it is testing this morning, is up.

 Bottom Line

  • These ratios would indicate a market lurch to risk ‘on’ and away from Fed Hawk fears if they break down.
  • They are doing what they need to do as a first step toward breaking down.
  • But both ratios are intact to their major trends, which are up.
  • The market is either tempting the herds back in before a final slaughter (to be indicated by gold reasserting relational strength over the other two more inflation sensitive, industrially utilized metals) or it is getting on the bull here and now in alignment with the mid-term election cycle and general seasonals.
  • It’s probably best to see whether these and other indicators ultimately hold or break down before committing heavily one way or the other.
  • The Fed is trying to mop up its liquidity mess and Austrian money supply aggregates show that is happening. But the question will be whether animal spirits will be released by the markets for a tradable rally in the interim. With the yield curve still on a flattener and no new steepener yet in effect, it could happen for a seasonal burst.
  • After all, everybody’s got the bear memo and the ‘inflation’s out of control!!!’ memo.