By Steve Saville
[biiwii comment: the chart below illustrates perfectly why we call the gold-silver ratio a “metallic credit spread” (hat tip Bob Hoye). This chart is gold-commodities, but it’s the same dynamic…]
In the blog post “Some gold bulls need a dose of realism“, I noted that relative to the Goldman Sachs Spot Commodity Index (GNX) the gold price was at an all-time high and about 30% above its 2011 peak. I then wrote: “Rather than imagining a grand price suppression scheme involving unlimited quantities of “paper gold” to explain why gold isn’t more expensive, how about trying to explain why gold is now more expensive relative to other commodities than it has ever been.”
A rational explanation of gold’s relative expensiveness begins with the premise that major trends in the gold/commodity ratio are invariably associated — in an inverse manner — with major trends in economic confidence. Since credit spreads are one of the best indicators of economic confidence, with generally-widening credit spreads signifying declining confidence and generally-narrowing credit spreads signifying rising confidence, it would be logical if there were a positive correlation between the gold/commodity ratio and credit spreads. As evidenced by the following chart, that’s exactly what there is.
Continue reading Explaining Gold’s Relative Expensiveness
We have been on the bounce scenario and speaking as a bear on the intermediate trend, I say thank you Mr. Kuroda. Everything, including clear as day analysis on the precious metals sector, is brought up to date in 34 highly graphical pages; and I feel that I, as a puny little market participant, am as well prepared as possible after once again doing the work.
I no longer tend to offer discounts or other incentives, as I see happening with some services as a bear phase engages. Frankly, this work is still under valued at today’s price. You read the more formal stuff at nftrh.com and the less formal stuff at biiwii.com. You know who I am by now.
The screen shot reprises the old Whack-a-Mole shtick and then NFTRH 380 gets down to serious business. This market is burping up data points and parameters left and right.
By Michael Ashton
Commodities were worth hating four years ago
It is amazing to reflect on the fact that the stock market last week experienced its worst 5-day span to open the year ever. I haven’t independently confirmed that; it seems incredible to me that in a hundred and whatever years we have never started with a 6% loss – but that is what is being widely reported. In any event, it has been a bad start and the market is back to the levels it last saw in August, before the inexplicable Q4 blast-off. Easy come, easy go.
Why is the market down? The harder question is the question of why it was up in the first place. Stocks have been persistently far above fair value measured by CAPE, Tobin’s Q, or any other traditional value metric. The argument that stocks were high because bond yields were low is perhaps the best explanation; this is after all part of the whole “portfolio balance channel” effect that the Fed has been trying to create with QE – raise the price of a good (bonds) and the prices of substitutes (corporate bonds, stocks) should also rise. (Left unsaid, of course, is why it is a good thing to move asset prices away from fair value. The ‘wealth effect’ is small, and zero-sum at best unless prices can permanently be moved away from fair value.)
Continue reading Up to Our Necks in It
More and more it looks like our long-term target for Copper is going to come about. That is and has for years now, been a buck 50 a pound. That level, which has seemed coded into what eventually became a global deflationary situation, could be the house call needed for players to finally anticipate an ‘inflation trade’ bounce or cyclical bull market.
Along with this hysterical bottom in the inflation trade (top in deflation) we’d expect to see things like Silver start to out perform Gold (Gold-Silver ratio has higher to go along with Uncle Buck, first) Palladium and Platinum shore up, Agriculture to bottom and of course, Energy as well. Very interesting times out ahead; maybe weeks, maybe months still. But coming. Cu 1.50 awaits.
Do not subscribe to NFTRH!
At least not yet, anyway… I am going to release it publicly for the first time in probably 5 years. Coming at what is a key juncture in most markets (talking the next 2 weeks), it seems like the right time to get this view of the current multi-market status out there before a wider audience.
NFTRH does not make predictions because they flunked me out of guru school and took away my crystal ball. But we always follow the analysis and probabilities and intuitively self-correct in real time if/as needed.
NFTRH 366 lays out the parameters of this key, potentially pivotal time in global markets. Generally, we have been right on the market’s turns ever since it resolved into the August drop and finally, things became ‘in motion’, which is the best environment to gauge and plan. Right now the motion is ‘up’, exactly as expected.
If you would like to have NFTRH 366 with no commitment and no strings attached, simply email me at gt<at>biiwii.com or use the ‘Contact’ link above and request so. If you find it is right for your needs I would welcome the opportunity to be among your market intelligence service providers going forward!
A solid 36 page report. The market bounce matures as it enters our target zone and sentiment is the indicator. Precious Metals continue to improve on the macro, but carry rising risk on the short-term. Question: Is HUI going to get to the 150’s before or after short-term risk is realized? Answer: I don’t know, but we are ready either way. Much more too. NFTRH 365 Out now.