Gold Miners & Inflation

A constant struggle in writing about the precious metals is in trying to be clear about the differences between the gold stock sector and other sectors when it comes to inflation.  That is because there are two types of bullish environments for gold stocks…

  1. The ‘play’, where all the inflatables rise with inflation expectations; this would be the ‘gold is silver is copper is oil is hogs is corn’ trade.  This is the play where the inflation and commodity gurus tell you to buy resources to protect yourself from the US dollar crash that is going to happen any day now.  A problem is that in this environment many resources often out perform gold, thus hurting miners’ fundamentals.
  2. The other is a longer trade or dare I say it, investment.  This is where commodity prices are declining and the USD is firm.  Gold is stronger than silver and the inflation oriented gold bugs get bearish because they can’t understand how gold will not go down with oil and indeed, inflation expectations.

I have often called #1 a ‘SELL’ on any strong rally that results.  #2 is a more difficult animal because it can be a grind as it sets up.  That grind would be the misperceptions game kicking in where the majority gets fooled into thinking if copper goes down so will gold.  After all, China’s gonna decelerate again!

tip.tlt.gdx

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Doctor Copper Updated

Copper is a tough one.  If copper hangs in and hints at an ‘inflation trade’ (i.e. anti-USD) bounce to come, I’d like to buy COPX or FCX.  The charts are coming along nicely.  COPX was NFTRH+’d recently for just such an occasion.

The weekly chart of copper is trying to hold above a downtrend breakout line and hold a trend out of March.

copper

But the monthly chart is still disgusting, a year or so after it was created…

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Ukrained… Again

To the extent that stocks are down and precious metals and crude oil are up on Ukraine and Russia?  Well look, you have probably been to this site enough to know my views.  I won’t badger you about it.

headline

Headlines from MarketWatch

Nah, check that.  It is often not advisable to buy precious metals on up days and it is never advisable to buy them on up days with negative geopolitical headlines and upwardly revised GDP.

Just a public service announcement from the website that deplores casino mentality, lazy analysis and people who do not think beyond cartoons.

I actually bought USO for a crude oil bounce play yesterday and now am forced to at least consider taking a small profit sooner than expected.  These events do little more than rile up the markets in the short-term.

Silver, Gold, Inflation & Goldilocks

It is rather obvious that the Silver-Gold ratio (SGR) will need to rise for any sort of inflation trade to whip up.  I think we can get a bounce in commodities here because they are over sold, Uncle Buck is over bought and I might add, UUP hit the upside target of 22.10 measured off its bullish pattern.  Beyond a trade however, the USD still looks bullish and commodities, not so much.

I found this old chart that tells the story of a declining SGR (post-2011) and a commodity index right in line with its dis-inflationary message.  In this environment Goldilocks has lived quite comfortably and kept the stock market on track.

sgr

Three options here…

  1. A little inflation phase whips up and beaten down commodities and precious metals (led by silver) out perform stocks or…
  2. The whole mess continues to drop and dis-inflation turns to something more impulsive, taking stocks with it.
  3. The fairy tale goes on and on into perpetuity, with silver gently under performing gold, inflation expectations gently declining… and they all lived happily ever after.  Nite nite little dreamer.

And two of the above are viable.

Currencies Big Picture

Since the last currency update using monthly charts, Uncle Buck is turning a resistance level to support.  This will be firmer with an August close above.

usd

Euro broke down from a wedge we had been following by weekly charts after getting very close to a post-Euro crisis target at the big downtrend line.

xeu

Canada dollar remains bearish after failing at resistance as projected.

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Gold Hatred and a Long-Winded TA Screed

We are operating to parameters on a would-be gold sector bottoming process, which has been a year+ long grind (‘grind is good’ as it absolutely ruins peoples’ nerves over time) and which by the way, everyone sees now as either a final bottom or a consolidation before the final and spirit destroying wipe out, depending on their Team’s hopes and aspirations (bull or bear).

About a year ago NFTRH projected two possibilities (within the context that it was only in the realm of potential) and they were a ‘W’ bottom or failing that (it promptly failed) an Inverted Head & Shoulders on the HUI.  Today a new pattern has joined the IH&S and it is a Symmetrical Triangle, which would be a consolidation before the final crash.

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