Lately we have been noting that the fundamentals for gold and especially gold stocks have been bad and getting worse. I am trying to streamline weekly reports and not clutter them with what we already know. But here in a mid-week update I’d like to pop a pictorial view in here for your reference so that there is no misunderstanding about where NFTRH stands on the subject amid the noisy larger and smaller media out there.
This update is inspired by a message I received from a non-subscriber about how the bankers win again and gold bugs give up and lose again. People can believe or act upon that crap elsewhere, but we will have none of it. The signals have been in the making for months now.
As we approach the long watched target of the sub-28 GDX gap (assuming that the more bearish H&S scenario is not in play, an assumption I would not make in too cavalier a manner) and with the assertion that if the miners do rally, as it currently stands they’d do it as a non-unique member of the anti-USD plays, below are some of the still ugly fundamentals.
From NFTRH 769:
While Gold vs. stock markets appears prep’d to bounce, there is no sign of a low in Gold/CRB and importantly to mining sector fundamentals, Gold/Oil.
Well, even Gold/Stocks is not as yet following through on a bounce even though stocks have pulled back this week. There is nothing yet in this picture indicating improvement and with crude oil and the Energy sector rallying, it’s still getting worse for gold mining. To be clear, our plan is for any long-term positive view of the miners to come AFTER the markets finish rotating and the cyclical stuff (e.g. oil, copper, etc.) tops out and not before. That is how the analysis has evolved.
Moving on, real 10 year yields are still very elevated and that is traditionally not a good indication for gold. This is a picture of monetary authorities in full control of inflation and hence, not yet a reason for players to jerk into gold, which can benefit when authorities are viewed as behind the curve or having lost control. You can see where this indicator was in 2020 when things were gold-bullish. We are far from there right now.
Libor/T-bill yields indicate complete calm in the banking/financial sphere. Again, not positive for gold. Regardless of whether or not authorities stealthily QE’d the system to bail out the banks, this indication is what it is. Picture the machines programmed to obey signals, not conspiracy theories. It’s healthier that way.
High Yield spreads are calm, indicating a still risk ‘on’ macro as we watch the markets rotate from items like Tech to defensives like Healthcare and also into Energy, which is following the bullish moves in oil and gas, which we were more than prepared for (CRB index still theoretically targets 305, perhaps in a final significant market rotation).
I think that a move toward defensives and a rotation into alternate sectors from Tech is late stage signaling, but gold and especially the miners will likely not respond positively or in a unique manner until after the whole macro gets cracked hard. For reference, recall the 2001-2003 phase and the micro phases immediately following Q4, 2008 and Q1, 2020. But this time if the everything bubble pops for real, we’d be looking for something much more extended. But not until. If the long-term bubble does not pop on the next macro washout, then it could be another dynamic trade in the miners like those noted just above.
Again, this update was a response of sorts to a message I received that disturbed me because I’ve been hearing it for decades now and while some aspects of the implied manipulation may be true, the indicators always advise how we should view the situation in advance. So it makes little sense to blame evil forces while or after the damage is being done.
