Thanksgiving for the Proper Gold Stock Fundamentals

By NFTRH

All through the bear market hopeful rationalizations were served up for a bullish case on the gold miners. All through the bear market we warned people not to eat that rotten turkey!

China demand, the China and India “love trade”, cyclical inflation driving up the prices of commodities and resources and the classic… economic growth in the US will create cost-push inflation through wage increases with the smart money seeking inflation protection in gold. All of those and a veritable Turducken of mishmashed ingredients were served to gold bugs as a decidedly not delectable appetizer before the main course.

But with a top in risk ‘on’ global markets now finally including the US (pending any holiday relief bouncing), the planets are aligning per the fundamentals that matter. This will drive up gold’s relational price to cyclical risk ‘on’ assets and improve gold mining bottom line operations (reducing miners’ costs per ounce of gold produced).

The sector will also be more appetizing to a much wider range of investors, now that their perceived sure things in the FAANGs and other momentum fueled, ‘can’t miss’ areas (like the Semi sector, which we warned on long ago: Semi Canary Still Chirping, But He’s Gonna Croak in 2018) are no longer working.

Continue reading Thanksgiving for the Proper Gold Stock Fundamentals

Revisiting the Age-Old Relationship Between Interest Rates and Prices

By Steve Saville

There is an age-old relationship between prices and interest rates that Keynesian economists have called a paradox (“Gibson’s Paradox”). The relationship was clearer during the Gold Standard era, but as I explained in a previous post it is still apparent if prices are measured in gold.

To understand “Gibson’s Paradox” and why it actually isn’t a paradox, refer to the earlier post linked above. Suffice to say that when money is sound or at least a lot sounder than it is today, interest rates don’t drive prices and prices don’t drive interest rates; instead, on an economy-wide basis both prices (in general) and risk-free interest rates are driven by changes in societal time preference. Moreover, as mentioned above and explained in my earlier post, even with today’s massive, continuous manipulation of interest rates by central banks the relationship is still evident, but only when interest rates are compared to a wholesale price index denominated in gold.

Continue reading Revisiting the Age-Old Relationship Between Interest Rates and Prices

US/Global Stocks, Commodities, Precious Metals and the ‘Anti-USD’ Trade

By NFTRH

[edit] With the intensity of this week’s move I’ve already taken a couple quick profits in items that could be considered part of the ‘anti-USD’ trade.

The most recent leg of the US stock market rally and the bounces in global equities, commodities and precious metals are coming as part of an “anti-USD trade”. Certain US stock sectors, most global stock markets, commodities and precious metals were pressured by the USD rally that began in April and now, as the buck eases, a relief valve opens.

All charts below are as of Thursday’s close.

US – S&P 500

The S&P 500 – in essence a collection of sectors that are ‘pro’, ‘anti’ and ‘neutral’ the USD’s status – appears to be on the way to our target of 3000+, based on a conservative measurement of its daily chart pattern. This was the NFTRH alternate scenario after our expected summer drive to test the January top did not prove out a then favored view that the test would fail. As you can see, SPX broke out, dropped to test the breakout and off it goes. We have since been operating to the new favored plan.

Continue reading US/Global Stocks, Commodities, Precious Metals and the ‘Anti-USD’ Trade

Multi-Market Status: Precious Metals, Commodities, US & Global Stocks

By NFTRH

A general review of the current status across different asset markets. This is not comprehensive, forward-looking analysis as per NFTRH, but it is an up to the minute summary (as of Friday afternoon).

Precious Metals

Gold, silver and Gold Stock indexes/ETFs made what I had thought were bear flags yesterday, but today painted them as short-term ‘W’ bottom patterns, in silver and the miners anyway.

This chart of gold (courtesy of Barchart.com) shows a flag breakdown, whipsaw and new closing high for the short-term move. As we’ve noted for weeks now, the Commitments of Traders (CoT) is in a contrary bullish alignment with large Specs all but wrung out of the market (they were fleeced again; don’t believe hype about their increased shorting being some sort of conspiracy). All in all, not bad for the relic. The bounce lives on.

Continue reading Multi-Market Status: Precious Metals, Commodities, US & Global Stocks

Midsummer Walkabout

By Tim Knight

I actually like it when we get past June 20. Knowing that each day has less sun is like a gift to me. I can’t say why. It just feels like a sense of relief.

Let’s look at some ETFs together. It would make a better narrative for me to order these differently, but I’m going to be lazy and leave them alphabetical.

First is commodities, which I think will roll over beneath the red horizontal I’ve drawn. Crude oil, in particular, I believe will drag this lower.

The diamonds remain in a long-term and intermediate-term uptrend. Short-term, it’s starting to gently turn lower, but as you can see from the moving averages, it’s going to take a LOT of damage to break this bull run.

Continue reading Midsummer Walkabout

Inflation Trade, in Progress Since Gold Kicked it Off in Q1 2016

By NFTRH

I am sure you remember the lead up to Q1 2016. The US economy and stock market were transitioning from a Goldilocks environment and narrowly avoiding a bear market while the rest of the world was still battling deflation. Precious metals and commodities were in the dumper and try though US and global central banks might, they seemed to fail to woo the inflation genie out of its bottle at every turn.

Then came December of 2015 when gold and silver made bottoms followed by the gold miners in January of 2016. Then by the time February had come and gone the whole raft of other inflatables (commodities and stocks) had bottomed and begun to set sail.

As I listened to Mr. Powell speak about inflation yesterday my mind wandered back to Q1 2016 as I thought about the Fed trying to manage inflation at or around 2%. I also thought about how inflation tends to lift boats, not sink them. At least that is what it does in its earlier stages, in its manageable stages.

The balls out post-crisis inflation begun by Ben Bernanke was a massive market input and I suspect we have not yet seen its full effects – other than in US stock prices thus far. So dialing back to Q1 2016 let’s look at a few pictures, beginning with the Fed’s 10 year breakeven inflation rate, which bottomed… you guessed it, in Q1 2016. That means that ‘deflation expectations’ topped at that time.

Continue reading Inflation Trade, in Progress Since Gold Kicked it Off in Q1 2016

Problems Are Emerging

By Heisenberg

Well, first thing’s first.

Donald Trump sent 11 tweets by 3:00 p.m. ET, a truly impressive “covfefe” tally, that included this batshit ramble about Lisa Page and Peter Strzok:

Yes, “what a total mess.” And for Christ sake, will someone please teach him what a proper noun is or, more to the point, what a proper noun isn’t?

But this was the one that mattered:

Continue reading Problems Are Emerging

Chart Of The Week: Commodity Valuations

By Callum Thomas

This week it’s Commodities, specifically an aggregate view of commodities and a look at valuations.  Commodities as an asset class rose from relative obscurity to become a popular addition to portfolios by the more innovative asset allocators in the last 10-15 years.  Although the “commodities supercycle” perhaps overstated some of the historical return statistics, it’s clear that commodities go through cycles and there is fairly clear economic logic behind the argument that they can offer diversification benefits.

But given the nature of the chart below, rather than dwell on portfolio construction aspects, I will focus on the cycle dynamics, and where commodities sit at this point of the market cycle.  The chart shows the GSCI, which is a relatively popular diversified commodities index, and our composite valuation indicator.  The bottom line is that after what has already been a solid rebound, commodities still look good value at this point.

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Yields, Inflation Trade and the Ongoing Boom

By NFTRH

Yields are up, bonds down again pre-US open, per Investing.com’s graphic…

This goes in line with inflationary signaling on the macro. Yesterday was an impulsive one for the ‘inflation trade’ (IT). Since the previous intermediate trend had been up before the recent consolidation in yields (bounce in bonds as fear struck the macro) continued strength from here would indicate a resumption of that rising trend in long-term yields.  Here are daily, weekly and monthly views of the all-important 10yr & 30yr US Treasury yield.

10yr daily…

10yr weekly…

Continue reading Yields, Inflation Trade and the Ongoing Boom