Of course, any indicator can be reversed at the whim of the algos and machines, but those direct the short-term daily mayhem in markets. They do not direct the bigger macro events. So if this is just a blip, so be it. But if it is real – and I have little reason to doubt it – then the macro situation would be changing right before our eyes, and it would be changing toward our larger 2023 disinflationary/deflationary, counter-cyclical plans.
The Gold/Copper ratio broke its downtrend channel, dropped hard to test the 200 day moving average and has so far held that test, trying to turn up again. If this is real, people (who do not want to ride a bear phase) should strongly consider getting out of the commodity/inflation trades at least, if not the whole pool. If this turns up and keeps going it would likely mark the ending days of the Q4-Q1/Q2 rally. No more words by me. I just wanted to show you a picture.
Currently Gold/Silver and Gold/Copper are heading in the opposite directions. I think it’s just silver bugs getting hysterical, but I have a bias – I sold my silver a day before last 5% move. What Gary thinks?
Well, I would think that too Armen, but the caveat about that is that silver never really did participate as an inflation trade since mid-2020. Instead, it acted more like gold and corrected while Oil, Copper, etc. kept going up. So I am giving Ag some benefit of doubt now. It has been wearing its precious metals suit through the inflation (unlike in 2011 when it rocketed and blew off to 50) and correction, so why can’t it wear that suit now? I would expect it to weaken relative to gold when deflationary pressures come ashore.