The Gold/Copper ratio is quite bent, but not broken
Much like the Gold/Silver ratio was not broken despite some hopeful hype on X that it was (boosting silver bulls’ case), the Gold/Copper ratio is under stress but still intact.
First, here is the Gold/Silver ratio showing the would-have-been breakdown it avoided by the hair of its chinny chin chin. A break below the uptrending moving averages is not a breakdown.
Now the drama shifts to the Gold/Copper ratio. I don’t want to spin this as favoring gold because frankly, it’s a worse looking picture than the Gold/Silver ratio had painted when it was under some duress. But the lower green arrow shows the would-be breakdown point.
The bigger picture of the Gold/Copper ratio adds more perspective.
With the ‘everything bubble’ potentially * enduring into Q4’s US election, or even into 2025, it is not surprising that cyclical copper is outdoing gold over the last few months. It could continue, but the forces of counter-cyclical pressure have been building since 2021 by this measure.
The Gold/Silver ratio (counter-cyclical, less inflation sensitive precious metal vs. one with traditionally more inflation sensitivity and a bit more cyclicality) has not broken down but is not yet putting on any kind of firm market warning. The recent weakness in the Gold/Copper ratio (counter-cyclical vs. cyclical metal) is on that script as well.
If The Gold/Copper ratio does break down and go back to the hell it came from over the next several months, we’ll have a different narrative in play, at least globally outside the US. For example, as noted several times recently, China is making some noise. But that is not the favored scenario. Counter-cyclicality is, pending 2024’s (IMO) desperate fiscal shenanigans and the Fed’s ‘we’re hawkish but not really’ routine (more on that later).
Just a little perspective on a couple macro indicators as we prep for another FOMC week extravaganza. Thoughts?
* “Potentially”, an important word.
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