Folks, just to be sure I am not leading you to outsized risk aversion too quickly, let’s review an alternate projection by a learned subscriber who let’s just say has probably forgotten more about the TSX Venture and the mineral exploration sector (and hence, many of the “inflation trades”) than I’ll ever know (I’m a macro dork, after all, not a mining/exploration stock analyst).
From his email:
Hi Gary,
I saw your note this morning on the GSR but wanted to throw out a point that if you zoom back a bit more on your long term chart that the next key support level looks well grounded at 47.5ish level so maybe that could be another scenario is retracement to that well defined level before a correction. See my 50 year framework below.
Here is my chart, extended back to the early 1970s.
This monthly chart could easily become as deeply oversold as the previously noted occasions (not quite there yet) prior to a snap back. So let’s realize that I just drew a logical target well ahead of time (57.50) and the Gold/Silver ratio is currently in its 2nd month of testing that target.
In today’s notes, a daily chart of USD/DXY shows the buck making another test of resistance and the moving averages. The trend is down, as noted. If USD breaks the trend and joins a rising Gold/Silver ratio the risk would very likely be realized. At this point, USD has not broken its daily downtrend and the Gold/Silver ratio has not definitively held the current support level.
So right now, USD is bear trending and the Gold/Silver ratio is simply at the originally projected target. * We could well get that bullish January we’ve been more than considering. The macro is at a decision point. Hence, “risk” of reversal. But short of that, trends are intact.
* When projecting a target like that, it seems like a long way down (it was) and when it is registered, we evaluate. If it breaks down further we will be well within the realm of momentum-driven speculation.
