A look at the daily and weekly chart situations for gold relative to cyclical and risk ‘on’ asset markets
The daily chart shows that gold is still constructive to break its downtrend in US and especially Global stock markets. As a side note, recall that gold has already been out-performing broader market measures like the Value Line Geometric index (XVG, the median of 1700 stocks) and small caps (IWM) per charts below.
Gold is bullish biased in relation to the Commodity index and slightly less so, but still constructive in relation to WTI oil.
Gold/Copper (GCR) is where it gets interesting and where an alteration to the macro view would come to the fore. GCR is grinding hard at the previous lows that have held the ratio in its uptrend. I have shaded the area that would compel a re-think on the forward macro, at least from a global (as opposed to US-centric) perspective.
Speaking of global, China’s economy appears to be getting a little bounce in its step, copper and China are correlated. As a side note, I added China large caps (FXI) yesterday for not only the FXI chart and the long noted contrarian aspect. The state of copper was a consideration also. As yet, the GCR is barely clinging to a positive bias, but I want us to be aware of a potential decision point upcoming.
The weekly chart continues to show that gold has not asserted over stocks markets and is still working on assertion over commodities. Interestingly, the Gold/Copper ratio does not look so vulnerable by this view.
Bottom Line
The broad asset market bubble is still indicated to be intact, but the anti-bubble, gold, continues to grind away at it. I see no reason not to expect the bubble’s end later this year or into 2025.
There is a potential new wrinkle, that could go well with a contrarian bullish China view. If this is a real low in China/US, at the least China could out-perform during what remains of the global stock bubble if this bottom/base (FXI/SPY ratio) continues to resolve upward (favored). At best, it may actually be an extended new bull phase for China (less favored). But that is far from proven at this point. Copper (4.58) is rising for a test of its all time highs (5.03). A failure could see China eventually fail. A breakthrough could see a new global trade in the making that would probably also see a weaker US dollar and renewed US inflation problems.
A lot of info for an update that I thought would be simple. But it’s a dialogue I want to keep open if/as needed. The macro situation is unchanged, but here we take a forward look at a couple of twists that could come into play.
