NFTRH+; Gold and Silver (and the SGR), daily charts and macro analysis

Gold and Silver, daily charts and the Silver/Gold ratio

Treasury bonds are positive, the 10yr-2yr yield curve is ramping (in a steepening direction within its inversion) and Credit Suisse bank is the latest newsmaker in the Bank Meltdown Olympics. Stocks are down, oil is down, copper is down and the US dollar is up! Inflation bugs wrong again. Gold is not copper. Gold is not oil. Gold is monetary.

Anyway, pre-market looks like a microcosm of the perfect macro backdrop for gold and especially the miners that will one day leverage its standing among cyclical assets. Let’s see how things develop. For now we are still on the Q4-Q1 broad stock market rally theme (I know, I am getting tired of it too), pending market support parameters. But the macro fundamentals continue to slide into place for the gold stock sector.

Gold is busting through the next resistance level on an in-day basis after holding the SMA 50. Let’s see ‘in-day’ turn to a multi-day hold before getting too excited, and then we’d project a test of the high from a year ago at 2078. Remember, with the USD strong (it held the SMA 50 yesterday) is appears to be getting the LIQUIDITY BID this morning. Hmmm, where have we heard that before? Oh yes, me hammering you with it over the years.

As a side note, remember that gold can get pressured too in an environment like this (if microcosm extends to a new and deflationary macro backdrop as everything but USD and T-bonds break down and/or weakens). But it will out perform all the stock market and commodity stuff that is geared to cyclical inflation or positive economic cycles. Cue again the inflation bugs. They need to be taken out.

Gold price (futures)

Silver bulls would like to think that their metal of choice is capable of doing what gold did, which is to take out the SMA 50. Interesting how Silver popped right back to the key area at the old 22 (+/-) resistance from last spring, isn’t it? As yet, silver has bounced pretty hard, painted the drop below 21 as a false breakdown below the SMA 200 (recall we allowed for a dunk below 21 within a still intact technical situation) and is now at a very important proving ground, which includes that 22 (+/-) resistance the SMA 50.

Silver price (futures)

For its part, the Silver/Gold ratio has bounced but not broken trend to turn back up. Silver tends to lead the PM complex when it rallies, so it would be beneficial for this ratio to get back above the SMA 200 and hold it.

Silver/Gold ratio

Bottom Line

This is not a time for greed. We should always view gold as anti-greed, and not cheer its price. If this week’s microcosm goes on to indicate systemic stress with yield curve steepening along with other indicators, capital preservation will be Thing 1. But eventually, the gold mining sector would birth a bull market out of this environment. That’s the theory, anyway. And it is not the theory that most people subscribe to.


This Post Has 2 Comments

  1. Lucius

    Hi Gary, something about GSR v. SGR: given that GSR is one of your two horsemen of apocalypse, and the two are the inverse of each other, does that mean you expect 1) SGR to go hyperbolic for some time if we have a more “orderly” deflationary process, and 2) GSR to go hyperbolic instead if we have a “market crash”? Or maybe a higher SGR is beneficial to the *entire* mining sector, but not to gold miners?

    (Since you consider GSR to be one of the indicators for the kind of counter-cyclical environment most conducive to gold miners)

    1. Gary

      Hi Lucius, if the GSR and USD rise together I’d have a level of caution on everything, including gold miners. I am not bullish on the “entire” mining sector because I am not bullish on inflation. The question I have is whether or not the gold miners will get drubbed with the next upturn in the GSR. But a non-crisis/mass liquidation rally in the PMs could be led by silver. It just may not be the ultimate FUNDAMENTAL rally, if that makes sense.

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