Gold News

Things That Matter to Gold Prices

As opposed to things that really, really don't...

The POINT of our title refers to the ridiculous fuss over Comex gold inventory and other promotions masquerading as fundamentals put out by cartoons masquerading as analysis, writes Gary Tanashian in his Notes from the Rabbit Hole.

Moving onto things that do matter to the direction and strength of gold prices, yields on 30-year Treasury bonds divided by 5-year yields are neutral at best, as is the indicator 30-year minus 5-year yields.

Yield spreads would be rising in a gold-positive environment. As a side note, this spread also tends to bring trouble for the stock market during its initial stages of rising.

Gold prices vs. Crude Oil prices are meantime getting bullisher and bullisher for the gold mining industry...

So too is the chart of Gold vs. Broad Commodities. It is looking bullish.

Gold vs. Industrial Metals is a little wobbly, but in an uptrend for months now.

But gold is still not preferred for safety in relation to Uncle Sam himself. The implication is that confidence is intact in government, in policy makers, in the whole ball of wax.

That's okay, we've got time (and patience).

With last week's sell-off in the stock market, gold is once again bouncing in SPX units. When this trend changes a major macro fundamental underpinning will be in place for the gold stock sector. This is at this point a bounce, not an uptrend.

Gold vs. Euro-hedged European stocks is the kind of chart that makes me think "Hmmm, a trend change has got to start somewhere..."

But as yet, no trend change.

Gold vs. un-hedged Canada stocks is better still, while the chart of gold vs. Yen-hedged Japanese equities is bouncing.

Yet gold vs. a currency that is actually under attack from its own central bank, the ECB, is bearish. Imagine that!

This chart would tell Europeans to own the currency that is being devalued by policy makers instead of owning gold.

Bottom line?

Gold fundamentals are on another bounce. But when stock markets (including and especially US markets) crack, policy makers are not so firmly revered (and obeyed), and risk 'off' also becomes more prevalent, confirmations will start coming in.

Gold is in a bear market, technically. That is indisputable. Gold may have ended its bear market as well, with no technical parameters yet confirming. But I do believe that the above represent on balance, a long, slow march toward change.

Meanwhile, the general game plan is for the gold-silver ratio (GSR) to indicate systemic stress as it rises (we noted a fledgling breakout in GSR a few days ago in an NFTRH update) and today, in-day, we have a resumed breakout. That would be bad.

Consider that the GSR has to top out and silver then needs to indicate a new inflation phase out there somewhere on the horizon. As is happening today, the gold sector can rise with a rising GSR (as fundamentals grind out improvement), but if silver takes over later on, watch out. That would be the momo time when casino patrons (aka stock market refugees) start paying attention to the sector.

That's not gonna be good for anybody.

Gary Tanashian successfully owned and operated a progressive medical component manufacturing company for 21 years, through various economic cycles. This experience gave Gary an understanding of and appreciation for global macroeconomics as it relates to individual markets and sectors. Along the way, Gary developed an almost geek-like interest in technical analysis (TA), to add to a long-time interest in human psychology. Various unique macro market ratio indicators were also added to the mix, with the result being a financial market newsletter, Notes From the Rabbit Hole (NFTRH) that combines these attributes.

See the full archive of Gary Tanashian.

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