There are many more details and indicators that inform well balanced ongoing analysis, but the three scenarios below are the general options before us. Excerpted from this week’s edition of Notes From the Rabbit Hole, NFTRH 342:
- Inflation signals do change their trend, long-term yields continue upward, the [yield] curve continues upward, oil continues upward, copper breaks massive resistance at $3/lb., stock markets remain aloft but under perform and silver out performs gold in a new ‘inflation bull’ as the promotions for everything from REE to Uranium to ‘Peak Oil’ would be back on. We could make money in that environment; in commodities, precious metals and stocks (with a global view).
- Inflation signals fail, long-term yields drop again, the curve continues upward, stocks get hammered, commodities resume their bear market and gold eventually grinds out an outperformance, much like it did on the 2014 up leg of the Gold-CRB chart below. We should preserve capital in that environment while positioning for the next bull market in the gold stock sector.
- Inflation signals fail, long-term yields remain stable or decline but the yield curve resumes its decline as short-term yields firm up vs. long-term yields. This would return Goldilocks to the picture. Stocks would like this scenario and precious metals and commodities would not. This would be an extension of what has gone on post-2011. We might not like or agree with it, but we would have to respect it.