As the inflation trades drop, gold out-performs and gold miners will benefit
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
The inflation trades are fading and gold is ascending to its rightful place in the disinflationary macro
The favored NFTRH plan is working out well as we planned the Q4 (2022) – Q1 (2023) rally back in November and as lumpy as it has been, it is intact to this day. Amid the fade in the inflation trades, our projected leadership (Tech and Semi, amid a disinflationary interim Goldilocks theme) is fully intact as well.
But what about gold in this disinflationary period? Goldilocks is not typically friendly to the metal that represents retained "value" as a Goldilocks economy can burp up plenty of speculative opportunity elsewhere. Well, note the word "interim" before the word "Goldilocks" above. This is not expected to be the 2013-2019 period that became a full fledged macro phase. It"s interim, temporary and maybe a nice opportunity for the bear market to suck in a lot of FOMOs (I am long key Tech stocks and even QQQ, but not as an investor). It is enjoyable participating for now, as with this item where I got back to my stock charting roots.
So have a look at gold laboring along in Tech terms with the GLD/QQQ ratio. That folks, is what we call an intact uptrend. Gold is a full participant in this pleasantly disinflationary phase because in my opinion it will not be pleasant for a full cycle (e.g. 2013-2019). Rather, I expect Goldilocks to fail after a much needed and anticipated rally in Tech as Tech leadership terminates one day at higher levels. Gold is simply marking time, which is what the metal has done for time immemorial.
So gold is uptrending in terms of the strongest equity market sector of which I am currently bullish.
If QQQ breaks up from the flag, Tech/Goldilocks theme is proven. Insofar as I'd be bullish, Tech is favored. Has been all year. BUT neg. signals brewing beneath market's surface. All bets off if TA levels lost on indexes. Using SPX as a guide. But NDX/QQQ look nice as of now. pic.twitter.com/bXWvTqupur— Gary Tanashian (@NFTRHgt) March 15, 2023
But the real macro play is going to line up later, when Tech eventually succumbs and we get this logical adjustment in the markets over with and bring in a critical mass of "happy days are here again! Bear market over!" FOMOs on board. It was originally and still is projected to be a bear market rally, after all.
A look at key commodity and stock markets plus the "inflation expectations" gauge (using associated ETFs) as adjusted by gold (using GLD) shows that the inflation – which we"ve been projecting for failure since spring of 2022 – is well on its way and completely on plan. All along I have advised that readers consider turning away from boilerplate analysis talking about gold and inflation because that was not going to be the play, and sure enough, it wasn"t, and isn"t. The chart includes a rough measure of global currencies adjusted by gold as well, for a global perspective on the bull market.
The play – assuming new trends remain intact – is a unique gold mining sector once Goldilocks runs her course. With Tech looking so constructive (per the tweet above) and actually starting to bull since, gold stocks are not yet unique. But it"s coming. The trends on this chart say so.
As important examples, what do you suppose will happen to gold mining bottom line operations – impaired as they were during the post-2020 inflation cycle – as gold continues to perform strongly in relation to cost-input commodity crude oil/energy? What do you suppose will happen to investors" mindsets when they see their played out stock markets greatly under performing the miners? Yes, exactly. You"ll have a unique sector performing for the same reasons most others are not.
After a tough stretch managing a whole lot of nothing (to the untrained eye), it is now time to be at attention and to separate ourselves from the investor herd, just as the gold mining sector will do from the herd of macro asset markets in 2023. Over the last few weeks NFTRH has gotten a lot more fun to write because instability is fun. Seeing autopiloted thinkers (including the average inflationist) bewildered is fun. Movement and change are fun! Stasis and autopilot thinking? Not fun.
That second thing is where the majority of the herds exist.
For "best of breed" top down analysis of all major markets, subscribe to NFTRH Premium, which includes an in-depth weekly market report, detailed market updates and NFTRH+ dynamic updates and chart/trade setup ideas. Subscribe by Credit Card or PayPal using a link on the right sidebar (if using a mobile device you may need to scroll down) or see all options and more info. Keep up to date with actionable public content at NFTRH.com by using the email form on the right sidebar. Follow via Twitter@NFTRHgt.