Gold Ratios are indicating our projected countercycle is slowly coming to be and that is to the benefit of the gold mining industry
Gold ratios such as those to Oil/Energy and Copper/Industrial metals are trending up, and that is not good for the formerly inflated economy (as manufactured in Q1, 2020 under the Fed’s monetary panic regime and Trump’s fiscal regime). *
But it is good for one unique, counter-cyclical industry, fundamentally.
First, a Look at Yield Curves
There has been a long and very slow gyration from an inflated cyclical to a counter-cyclical environment, which is still not obviously in view yet. But the “bust” side of the boom/bust continuum awaits as the 10yr-3mo Yield Curve has long-since joined the 10yr-2yr in steepening.
A majority of hopeful people and the media tending them continue to tout the wrong-headed idea that since the curves de-inverted, we have avoided a recession. Why, on December 18th Fed chief Powell actually said so after the FOMC meeting previous to this week’s, calling into question his competence (or his forthrightness).
The article linked above strongly begs to differ with our confident Fed chief and backs it up with facts.
* Relax partisans, the inflation problem was cooked up under Trump. Fact. Biden did nothing to help it and in fact, extended it.
Gold Ratios and the Counter-Cycle
On to gold ratios and their signals, using the related ETFs. Since the post-2020 correction (which logically came amid ramping macro inflation signals) gold is trending up vs. commodities. That is disinflationary signaling. See chart below.
In still going sideways vs. US headline stock indexes, the picture is not quite complete (it should be noted, however, that gold is firmly trending up in relation to the balance of global stocks, ex-US). Give it time. I expect Gold/SPX to break its 8-year bottoming/base before long…
…and unify the counter-cyclical macro view.
Here is a daily chart view of disinflationary macro signaling as gold rises vs. commodities. In other words, as its “real” price, as measured in those commodities, gently rises. For good measure, I have added the miners of gold (GDX (NYSE:GDX)) vs. the producers of Energy (XLE (NYSE:XLE)) and copper (COPX). Those trends are also turning up.
Why gold mining? Why should long-suffering gold bugs actually believe that the gold mining industry could once again provide the positive leverage to gold that it has mostly failed to exhibit since 2004? Because for the most part, the 2004-2022 era was mainly antagonistic to the miners, fundamentally.
As I’ve been saying since the Continuum busted the limiters back in 2022, we are “changing the macro”. That is the long-term play and legions of robotic Cramer fans, among many others in the public, will have none of it (until much later when it is time for them to FOMO, MOMO and buy our over-valued shares). It’s a slow process, but being on the right side of it will be well worth in that far off time when Cramer’s herd be lecturing us about the virtues of gold and a bearish stock market view.