Gold, Silver & The Macro

Persons micro managing the precious metals are fixating on the Symmetrical Triangle (bearish continuation) and a coming ‘Death Cross’ of the MA 50 below the MA 200.

The symmetry has been apparent for about three weeks and the Death Cross is hype put forth by those who would make grand TA statements.  The Death Cross means next to nothing.  I mean, how much good did the Golden Cross that the “community” was pumping in March end up doing?

Gold is bearish and has been bearish by its technicals (below the 50 and 200 MA’s), and ever since the economic soft patch was put behind us (cold weather, remember?) by its apparent macro fundamentals as well.  NFTRH has been keeping this situation locked down and in a box for future reference.  The box will be opened when the time is right.

Meanwhile, I’d suggest that people avoid micro managing gold.  It is not an idol or a religion, and while there is a whole industry champing at the bit to begin promoting it again, it is just a tool for retaining the value of money.  Sometimes tools sit in the toolbox.

As for silver…

Poor man’s gold is scuttling along the floor of what is major support dating back to 2009-2010.  The daily chart above shows two previous failures to get above the SMA 50.  Silver is going to make an important break upward or downward within a matter of weeks.  Check out the weekly chart for reference…

With the bearish analysis showing up out there you’d think silver had already lost the big picture.  No, all the noise is from technical people keeping the masses enthralled with prognostications based on daily charts like those above.

Facts:

1. Silver is just above critical long term support
2. Silver has not broken down from this support
3. Silver has not broken up from trend line resistance*
4. One of these must give way in the next several weeks
5. No amount of pom-pom waving or doom saying is going to influence it in one direction or the other

So why not realize that the precious metals are just another asset class that is in a holding pattern, pending further developments?  Why not tune out the caricatures in the media that have been wrong for years now and understand gold’s real fundamentals and silver’s relationship to gold within the macro processes?

Indeed, why do not gold and silver bugs just relax and wait for macro signals like the answer to the question ‘what is silver going to do in relation to gold?’

There is a world of assets out there depending on the answer to that and similar questions that would indicate whether the next phase is going to be inflationary or deflationary.  Why, even stock market participants should be paying attention to the macro.

Notice how the S&P 500 (bottom panel), which had been in positive correlation with commodities (2nd panel) and the Silver-Gold ratio (SGR) has taken advantage of global deflationary pressure over the last couple of years and actually gone against the outgoing SGR and commodity tide.  That would be our little friend Goldilocks enjoying her ‘just right’ porridge.

We are working on a thesis that a big picture breakdown in the SGR (breakout in the Gold-Silver ratio) would end Goldilocks, however as deflationary pressures mount.  Conversely, if silver breaks out vs. gold we would be talking about an inflationary phase.  Either way, Goldilocks gets kicked out of the house.

The gold and silver ratios are just one tool in the box.  As Bob Hoye describes them, a sort of metals related credit spread.  Speaking of which, actual credit (bond) spreads are in play along with several other tools in helping determine what the coming phase is going to be.

Nothing is as simple as one post can try to make it appear, so I will not try.  There are so many moving parts in play and they seem to be coming down to the next several weeks or few months, as indicated by the weekly chart of silver above.  So the point of this post is…

• Relax and tune out the short term micro management.  If you’re too heavily positioned in a way that makes you feel uncomfortable, get things in alignment with a sleep test of your choice.
• Change is coming, but there are valid and very different arguments as to what its nature will be.  Let the change reveal itself at least in strong hints before strong commitment.
• Being in alignment with these changes will likely be very profitable while being on the wrong side, quite the opposite.  Using the stock market as an example, both manic upside blow off and resumed roll over and decline remain in play.  As for the precious metals and indeed the greater inflation-deflation debate, the story is the same, the pros and cons are not yet definitively sorted out.
• Avoid taking easy to digest info bites as instructions and await definable and real data points.  They’re coming and I suspect that gold, silver and the relationship between the two will be front and center in the macro toolbox.

* With reference to the weekly chart of silver above, as NFTRH subscribers will recall we tracked a very similar situation (creeping along at support toward a definite break OUT or break DOWN point) on the weekly chart of the CCI commodity index for many months right up until the day of its eventual breakout. 

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