A Path Toward Inflation

By Biiwii (as posted at nftrh.com)

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.

The ratio got destroyed as the Bernanke Fed jammed a risk ‘on’ phase into gear with QE 2 and a great money making phase was on. Casino patrons, momos, black boxes and substance abusers could not help but make money, gurus pimped everything from Rare Earth Elements to Lithium to Copper.

Continue reading A Path Toward Inflation

It Must be a Gold Bull Market, Because…

By Biiwii

As posted at nftrh.com

It must be a gold bull market because…

  • Gold analysts (code for gold obsessives; analysts cover asset markets, including gold), who for years pumped people to be bullish despite an obvious bear market, are now taken seriously again as they issue the same dogma.
  • A Technical Analyst months ago advised “30,000 coffins” would be needed for gold bugs and has since gone quiet while another is bearish, no bullish, no bearish again, no bullish again. Charts are only one component of gold market management, but the TA’s are again enthralling the gold community with lines and squiggles.
  • Yet another gold bug TA somehow manages to tie in cycles and God for a bullish view of gold and silver and a 2016 crash for world markets. There’s a niche for everything, I guess.
  • The major media as well is in obsession mode, as we find out about bullish calls on gold by people smarter than we are, like Soros, Gundlach and Druckenmiller.
  • And to balance it all out, there is a man and his computer advising that gold has not yet seen its cycle lows.

It goes on and on… all of them have ardent followings. What to make of that?

The above are just observations, not reasons to think gold is in a bull market. But with the hyper kinetic environment currently in play I am reminded of the 2001-2011 period and how annoying it was to observe the sector during a bull market (unlike the bear, which was relatively easy; just avoid it).

It was annoying to read the reasons that Goldman Sachs’ Technical Analysis team gave for a major correction when gold was at 800 (uh, it went up) and it was annoying to read the gold promoters’ reasons why you had to own gold in the face of the oncoming Armageddon (I agree that gold is a sensible portfolio holding, but I don’t agree with the trade in fear that so often goes with it). Gold is simply value and insurance, as I noted in this and many other articles back then.

Moonshine or Strychnine (Dec. 4, 2005)

spx.gold

Continue reading It Must be a Gold Bull Market, Because…

Canada Dollar and Commodities

By Biiwii

There is a lot of talk lately about the Canadian dollar and commodities that seem to be ignoring its return to weakness.  Being a ‘commodity currency’ the CAD is being talked about as a leading indicator on commodities, which I as well believe need to take a breather (disclosure: I own Agri fund DBA, per NFTRH highlight last weekend, as my only commodity holding) and against my XLE holding I shorted crude oil yesterday.

Anyway, I don’t see the ‘leading indicator’ aspect of this.  CDW and DBC (commodity fund) bottomed together in January.

cwd and dbc, canadian dollar and commodity fund

What’s more, using a weekly chart we see that they had dropped together pretty reliably as well.

canadian dollar and dbc

The test of the support going on in CDW right now is probably pretty important to the commodity case, however.

Bearish Article on Gold

By Biiwii

A bullish article on gold that is well, you know… and to boot it’s got a pretty picture of some shiny gold bars!

Ref:  Gold has everything in its favor

Everything?  Really sir?  Do tell…

“This year’s rally has legs, spurred by the right economic conditions”

Well yes, they were the economic conditions that were an important part of the Macrocosm, which we began gauging last summer.  Okay, so were you and MarketWatch writing these things when it was time to get bullish late last year or just now after a $200/oz. rally?  Just curious.

“Left for dead for almost four years, gold has suddenly made an amazing comeback: It’s up over 50% this year.”

Why does the MSM always find a need to use words like “amazing”?  Gold’s rise was not amazing, it was logical, given the early 2016 risk ‘off’ environment and its own solid fundamentals (after years of poor fundamentals).

“Several gold investors who have enjoyed the ride so far believe the next move is up from here — possibly even taking out prior highs for the metal” 

First of all, you don’t “enjoy the ride” in gold.  You take comfort in the fact that it will be stable in times of stress and discomfort.  Substance abuser.   Now we are on to taking out the prior highs already?  So who is advising this?  Well, he then trots out the laundry list of always-bullish gold fund managers.  That’s who.  They are enjoying the ride but they were also fully on board the ride down to below 1100.  Let’s have perspective.

Now, I do and always have liked John Hathaway, so take my wise assery with a grain of salt.  Hathaway is talking longer-term and always has been long-term oriented.  So am I, having bought in 2002-2003 and having sat like a contented mother hen through the bear.  But it is the MSM and its stupid puff pieces that I object to; writing positively about gold simply because that is what the public wants to read right now.

The article goes on to list some right minded and some wrong headed reasons to buy gold.  Also, the obligatory stock picks are trotted out (including my own KLDX… thanks).  Then the blah blah blah into the close.  Another article on gold in the books and it comes right at a time when we can expect a negative reaction or correction in the precious metals.  Perfect.