Well, just about the only asset the sucks is gold. Everything else is creeping higher. Gold – the “precious” metal – looks ready to break the next psychologically important level of 1200.
I took a screenshot of the chart below a couple of hours ago, but precious metals (and their miners) are even weaker now. I think the junior miners could easily slip down to the green tinted area. “Precious” metals are totally stinking up the joint again, being just about the only asset on the planet that’s falling, and the miners are thus falling at an even higher speed.
My canines allowed me to sleep in (which I’d prefer they do on a weekend than a weekday, since now I’m frantically behind). I’ll just toss one chart out there for now – – gold – – which (hopefully!) will respect its trendline that it established late last year. This week is pretty important for precious metals. Even if it breaks this line, I think it’ll be OK longer term, but it should would make things cleaner if we just kept the series of higher highs and higher lows cooking along.
There has been a lot of talk about how gold is not a good inflation hedge. Indeed, with the recent bounce in inflation expectations, this was shown to be true over a short timeframe, at least in relation to silver and other commodities. Gold sagged while the more inflation-sensitive commodities bounced.
If you are following the gold stock sector, please put aside analysis focusing an undue amount of attention on inflation. The proper fundamental backdrop for improving gold mining operational efficiency is one where economies and stock markets are weak and liquidity is constrained. That is when gold (risk ‘off’ liquidity) rises relative to those things that are positively correlated to economies.
What has been going on since mid-February is a burst of the ‘inflation trade’ as evidenced by silver’s leadership in the precious metals sector. This opened the barn door for all kinds of inflated animals to flee into the light of day, and for commodity and inflation boosters to do their thing. As often happens with silver, things were pushed to and even through their limits. Silver went up, oil went up, base metals went up and stocks went up.
But what we should do is retire back to some of the things that actually indicated bullish for the gold sector well before the mini hysteria (and market relief) cropped up. A pullback/correction in gold stocks would be an opportunity.
Gold vs. Silver took a real hit and now is bouncing, unsurprisingly as USD makes a final support bounce attempt of its own. (more…)