Macro Implications, As Silver Takes Leadership From Gold

Since we noted the initial move to break the 200 day moving average – and at least temporarily break the downtrend on August 27th – the Silver/Gold ratio (SLV/GLD) has held its breakout, looking to close the week and the month of August on a signal that we have long anticipated.

silver gold ratio

Okay, but the monthly chart of the Silver/Gold ratio makes abundantly clear that nothing has happened that has not happened before during the precious metals bear market. So that is the caveat to a macro thesis that would see a change to inflationary (as led by Silver/Gold), thereby letting commodities of all stripes and many global markets out of the barn. The monthly EMA 30 (grey dotted line) is a reasonable marker for the ratio’s post-2011 containment. The ratio’s price is below that marker. Continue reading "Macro Implications, As Silver Takes Leadership From Gold"

A Path Toward Inflation

Yes, it’s another inflation post going up even as inflation expectations are in the dumper and casino patrons just cannot get enough of Treasury and Government bonds yielding 0%, near 0% and below 0%.

Feel free to tune out the lunatic inflation theories you’ve found at nftrh.com over the last few weeks.  But if by chance you do want to look, here’s a visual path we have taken to arrive at the barn door, behind which are all those inflated chickens, roosting and waiting.  All sorts of animals will get out of the barn if macro signals activate.

Gold led silver ever since the last inflationary blow off and blow out in early 2011.  The gold-silver ratio rose through global deflation, US Goldilocks, good times and bad.  There was no inflation problem, anywhere.  Then early this year silver jerked leadership away from gold and now for the second time the ratio of gold to silver has broken below the moving average that has defined its trend (it did so in 2012 as well).

gsr

Why is this significant?  Well, try on 2010 for size (see chart below).  I for one happily managed the gold-silver ratio up spike in 2008, buying gold miners as they crashed.  As gold (monetary, risk ‘off’) topped vs. silver (commodity/monetary, relatively risk ‘on’) we expanded the bullish view to commodities as well.  But then came the bottoming pattern that was not a bottoming pattern.  To this day I believe that the macro was preparing for a next leg up and some serious new destruction before Ben Bernanke, the “Hero”, sprung into action and ruined the beautiful Inverted H&S pattern that long-time NFTRH subscribers will remember me making a big deal about at the time. Continue reading "A Path Toward Inflation"