Slope of Hope Blog Posts
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Gold Stocks: Different This Time
By Biiwii
The title does not include a (?) after it and that is for a reason. The gold sector’s fundamentals, both sector-specific and macro, are improving and this was not the case during the last exciting upturn in the sector circa summer 2014.
Back then, everything from Russia’s move into Ukraine to the Ebola scare were imagined to be sound drivers of the gold price. This stuff proved, as expected, to be wrong when the whole complex made new lows in November of 2014 (prior to this year’s ultimate lows).
What is driving gold and the gold sector this year? The things that we have been saying for years now would be needed.
- Gold rising vs. commodities: Indicates a counter-cyclical global economic atmosphere (engaged)
- Gold rising vs. stock markets: Indicates an environment in which mainstream investors would be motivated to consider the sector (constructive, not yet engaged)
- Gold rising vs. global currencies: A self-explanatory indicator of waning confidence (constructive+)
- Declining junk/quality bond spreads: Indicates waning confidence in the financial system and those who have propped it up (engaged)
- Economic contraction as presented in mainstream economic data releases (constructive, not yet engaged)
- Treasury yield spreads rise: Indicates risk aversion to systemic stress, whether inflationary or deflationary and waning confidence (10yr-2yr inconclusive as of yet, 30yr-5yr engaging)
