Best of the Week
Most Popular
1.Gold Price Trend Forecast, Where are the Gold Traders? - Bob_Loukas
2.Stocks Bear Market of 2017 Begins? Shorting the Dow At its Peak! - Nadeem_Walayat
3.Betting on President Trump Leaving Office Early, Presidency End Date - Betfair Market - Nadeem_Walayat
4.Why Stock Market Analysts Will be Wrong About 2017 - Clif_Droke
5.Is This The Best Way For Investors To Play The Electric Car Boom - OilPrice_Com
6.Silver Price 2017 Trend Forecast Update - Video - Nadeem_Walayat
7.Gold Price Set For Very Bullish 2017, Trend Forecast - Austin_Galt
8.10 Things I learned From Meetings With Trump’s Transition Team - - John_Mauldin
9.How Investors Can Profit From Trumps Military Ambitions - OilPrice_Com
10.Channel 4 War on 'Fake News', Forgets Own Alt Reality Propaganda Broadcasting - Nadeem_Walayat
Last 7 days
Underperformance in Gold Stocks Argues for Interim Peak - 25th Feb 17
Watch What Happens When Silver Price Hits $26...  - 25th Feb 17
Gold Futures Buying Yet to Start - 25th Feb 17
When the Stock Market Flying Pig Tops - 24th Feb 17
Gold, Second Fed Hike and Interest Rates - 24th Feb 17
Bitcoin Price Hits Record High! - 24th Feb 17
Another Stock Market Bubble? Bring it On! - 24th Feb 17
What Investors Need To Know About U.S. Money Market Funds? - 24th Feb 17
When Was America’s Peak Wealth? - 24th Feb 17
The Oscars – Worth Their Weight in Gold? - 24th Feb 17
The Best Reasons to Buy Gold in the Age of Trump - 22nd Feb 17
Silver, The Return of Stagflation - 22nd Feb 17
Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - 22nd Feb 17
Gold: Short End US Rates Matter More Than Long End Real Yields - 22nd Feb 17
CONTINENTAL RESOURCES: Example Of What Is Horribly Wrong With The U.S. Shale Oil Industry - 22nd Feb 17
Here’s Proof Rising Rates Are Good for Gold - 21st Feb 17
Gold and Silver Weekly Update - 21st Feb 17
US Dollar and Gold Battle of the Cycles - 21st Feb 17
NSA and CIA is the Enemy of the People - 21st Feb 17
Big Moves in the World Stock Markets - Big Bases - 21st Feb 17
Stock Market Uptrend Continues - 21st Feb 17
Brent Crude Oil Price Technical Update: Low Volatility Leads to High Volatility - 20th Feb 17
Trump’s Tax System Could Spark The Wave Of Self-Employment - 20th Feb 17
Here’s How to Stay Ahead of Machines and AI - 20th Feb 17
Warning Signs Of Instability In Russia - 20th Feb 17
Warning: This Energy Investment Could Wreak Havoc On Your Portfolio - 20th Feb 17
The Mother of All Financial Bubbles will be Unimaginably Destructive when it Bursts - 19th Feb 17
Gold’s Fundamentals Strengthen - 18th Feb 17
The Flynn Fiascom, the Trump Revolution Ends in a Whimper - 18th Feb 17
Not Nearly Enough Economic Growth To Keep Growing - 18th Feb 17
SPX Stocks Bull Market Continues to make New Highs - 18th Feb 17
China Disaster to Trigger Gold Run, Trump to Appoint 5 of 7 Fed Governors - 18th Feb 17
Gold Stock Volume Divergence - 17th Feb 17
Gold, Silver, US Dollar Cycles - 17th Feb 17
Inflation Spikes in 2017, Supporting Gold Prices Despite Increased Odds of March Rate Hike - 17th Feb 17
Roses Are Red... and So's Been EURUSD's Trend - 17th Feb 17
Gold Trade Note Sighted - 17th Feb 17
Gold Is Undervalued Say Leading Fund Managers - 17th Feb 17
NSA, CIA, FBI, Media Establishment 'Deep State' War Against Emerging 'Trump State' - 16th Feb 17
Silver, Gold Stocks and Remembering the Genius of Hunter S. Thompson - 16th Feb 17
Maps That Show The US’ Strategy In Asia-Pacific - 15th Feb 17
The Trump Stock Market Rally Is Just Getting Started! - 15th Feb 17
Tesco Crisis - Fake Prices, Brexit Inflation Tsunami to Send Food Prices Soaring 10% 2017 - 15th Feb 17
Stock Market Indexes Appear Ready to Roll Over - 15th Feb 17
Gold Bull Market? Or was 2016 Just a Gold Bug Mirage? - 15th Feb 17
Here’s How Germany Buys Time From China - 15th Feb 17
The Stock Trader’s Actionable Guide to Trump - 15th Feb 17
Trump A New Jacksonian Era? The Fourth Turning (2) - 14th Feb 17
Stock Market Yet Another Wall Street 'Witch's Brew' - 14th Feb 17
This Is Why You Don’t Own A Lot Of Stocks - 14th Feb 17
Proposed Tax Reforms Face Enormous Headwinds - 14th Feb 17

Market Oracle FREE Newsletter

State of Global Markets 2017 - Report

Gold’s Macrocosm: The Planets Align

Commodities / Gold and Silver 2016 Feb 13, 2016 - 11:03 AM GMT

By: Gary_Tanashian

Commodities

We introduced the graphical view of the preferred counter-cyclical environment for gold and especially the gold stock sector in July:  Macrocosm.  We have updated the view several times since at NFTRH.com, with the macro backdrop getting more and more supportive of the gold sector over the last half a year.


Now that the world knows gold is bullish and those pumping gold for the wrong reasons are finally right anyway, let’s take each of these macro indicators one by one.  We will start with the little planets and work our way up.

  1. “Chindia Love Trade”:  This has little to do with gold’s rise.  China demand, Indian weddings and manipulative capers on the COMEX for that matter were pumped throughout the bear market, and the price kept dropping like a stone.
  2. Overt Inflationary Effects:  This may yet come into play, but gold has not been rising on readily observable inflation or inflationary fears.  Indeed, we are at peak deflation anxiety although I expect a transition out ahead.  Watch silver vs. gold among other indicators.
  3. Gold Community Throws in the Towel:  Some people are still waiting for that event, but I think this cycle is much like the 1999-2001 bottoming cycle.  It was a process and gold bugs in my opinion have long since thrown in the towel when some of their most staunch members got in line behind a forecaster and his computer (which just lately seems to have altered its code, by the way).  The gold “community” may have been ground to a pulp as opposed to making a final puke.
  4. Gold Rises vs. Commodities:  This is actually an important planet and should be larger (but what are ya gonna do?).  Since gold has been rising vs. commodities for years it has been an indicator of global economic contraction and deflation.  It has been a ‘steady as she goes’ indicator and continues to indicate the right environment for the birth of a gold sector bull market (although when silver takes over leadership from gold later on, the dynamics are going to change as an ‘inflation trade’ whips up).
  5. Gold Rises vs. Currencies:  This one has been in process.  I have marveled at how desperately millions of market participants have clung to their confidence in monetary authorities who routinely tramp out paper and digital money units.  That is now cracking and recently we have introduced a new indicator, risk ‘off’ metal (gold) vs. risk ‘off’ currency (Swiss Franc) and gold has broken out vs. Swissy, indicating a waning confidence in paper/digital money.
  6. Yield Spreads Rise:  The 30yr-5yr yield spread has been making a very bearish signal for the US stock market.  See this post:  The Scariest Stock Market Chart in the World.  It is potentially bottom making, but not conclusively.  The 10yr-2yr is bouncing a bit but has not made any definitive signal yet.  This remains a holdout fundamental to gold’s case.
  7. Confidence Declines:  Confidence is declining the world over.  See ECB jawbone QE, see market bounce and drop.  Same thing with BoJ NIRP policy.  This week Janet Yellen both stood firm behind the Fed’s rate hikes and openly pondered the prospects of NIRP in the US.  One big chink in the formerly impenetrable armor around the Federal Reserve.
  8. Economic Contraction:  We got on this first with the gold vs. commodities ratios’ bull market and then with palladium dumping vs. gold in June.  We then added multiple posts showing machine tools decelerating (Machine Tools Fading, in July) and finally, a new downtrend in Semiconductor equipment bookings and billings.  Okay, I think we can rest our case.  As for declining confidence in monetary authorities, see this Biiwii post for more on Yellen, in which she finally indicates that “there’s a chance of a downturn ahead”.  Unbelievable, 6 months too late for that admission, I’d say.
  9. Gold Out Performs Stock Markets:  The big one, and it is the reason that our Macrocosm theme got rammed front and center over the last couple of weeks, going from the realm of the theoretical and likely to the probable and proven (to paraphrase a term from our friends, the miners :-) ).  Here is gold vs. S&P 500.  It is getting repelled a bit today with the stock market bounce we anticipated, but which sure tested my patience.  Stocks probably need to relieve some of the short-term pressure.  Sentiment had become a Tinder Box again, and the bounce was on.

That folks, is a trend being changed.  The implications will be that traditional money managers (instead of just we lowly gold bugs) will be moving into the gold mining sector because their mandate is to herd into what is working.

For years now NFTRH has noted that it is the counter-cycle (h/t Bob Hoye) that is going to bring on the right environment for the gold sector, not the widespread hallucinations about inflation and Asian demand in the face of global deflation.  That comes later, and it will come sooner or later as the deflation play gets… played out.

For now, gold and the miners are doing exactly what they are supposed to do at the start of a new cycle.  With that knowledge in hand, I am finally able to manage the sector for subscribers not in the defensive way of the last several years, but an offensive way.  The pullbacks will come and they look to be opportunities.  We have our fundamentals coming into place, finally.  Well Hallelujah!

Subscribe to NFTRH Premium for your 25-35 page weekly report, interim updates (including Key ETF charts) and NFTRH+ chart and trade ideas or the free eLetter for an introduction to our work. Or simply keep up to date with plenty of public content at NFTRH.com and Biiwii.com.

By Gary Tanashian

http://biiwii.com

© 2016 Copyright  Gary Tanashian - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Gary Tanashian Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife