To preface, I’ve no proper to be proper in regards to the markets. All I’ve are indications that the herds both don’t find out about or don’t care about (I do know this by relative Twitter follows and, I assume, web site reputation in comparison with promotional pursuits tending the herds and instigating their greed). *
So, any submit like this may develop into mistaken if, on this instance, the / ratio by some means reverses, turns and burns, portray me as mistaken headed. Nevertheless it has not carried out that. What it has carried out is proceed with the favored NFTRH macro theme that has been in place for many of the final yr. That theme is that whereas the herds concentrate on backward wanting indicators (and promotions), the ahead wanting ones have pointed to a continuum of inflation>disinflation>deflation scare within the interim to any new inflation cycle out on the distant horizon.
It’s irksome when gold bug or commodity writers/analysts discuss gold and “the metals” as a factor. As if gold is silver (Au’s little commodity/inflation tinged bro), is copper, is tin, is metal, all topic to comparable provide/demand/macro fundamentals. To be honest, I’ve observed over time that these “the metals” touts have died down. I suppose that’s what an prolonged commodity bear market will do. However post-2020 there have been lots of people bullish on copper and gold concurrently, which is considerably of a straddle between one steel with unfavorable fundamentals (e.g. gold from mid-2020 by most of final yr) vs. one with optimistic fundamentals (e.g. copper into mid-late 2021 or so).
As we speak the roles are reversed, however the wrongheadedness continues within the type of these bullish on each metals. Promotional touts embody China reopening for copper and the “China/India love commerce” for gold, the ‘purchase assets!’ auto-piloted robots and the Fed, which can cease elevating rates of interest and go extra dovish. However the cyclical stuff, like copper, together with most commodities and inventory markets, ought to get hammered for the very causes that the Fed will take away its hawk costume. Gold can get dinged, however it’ll retain worth in relation to the cyclical stuff.
Copper is an industrial steel. Gold is gold. An anchor, a lump of heavy worth that will get marked up or down over many years and centuries relying on the temper of people towards that which people have constructed; specifically, monetary techniques and related economies that require financial constructing supplies, together with most “metals” and none with extra star energy than Physician Copper. Most metals are provide/demand pushed in correlation with economies. Gold is much from that. It’s extra greed/concern pushed. Certainly, you can name the Copper/Gold ratio a Greed/Concern ratio.
Checking in on our Copper/Gold ratio macro indicator we discover that on the implied day of the Fed’s final charge hike this indicator of financial deceleration and the deceleration of that which manufactured the financial cycle, inflation, proceed to interrupt down. “The metals”, my ass. Copper and commodity bulls need you to spend money on jingles like a brand new “commodity super-cycle” and naturally on the shorter-term the “China reopening” story. However the indicator is the indicator and it says ‘ah, no, not but pricey super-cyclers’.
Our place is one thing fully completely different within the interim whereas planning to purchase at a later date from commodity super-cycle herds thundering over a cliff. Herds… that’s the rationale they exist. The present herd received on the inflation/commodities/copper tout effectively after central banks created the newest inflation cycle and they’re getting out effectively after they need to have on the dis-inflation cycle (a yr in the past with a second probability again in February).
The every day chart of the Copper/Gold ratio continues to interrupt down on the implied day of the Fed’s final charge hike. Cu/Au might reverse and rally tomorrow. It additionally might tank additional, taking the herds with it. I, and the folks I write for, are presently ready for the second factor because the predominant pattern for maybe many months ahead.
