September 18, 2021

Metals Ratios Continue To Indicate Inflation

Metals Ratios Continue To Indicate Inflation

And that is welcome for monetary and fiscal policymakers of course since inflation is the only trick they have up their sleeve to bail this mess out once again. And this is no comment on COVID-19. The economy was slowly decelerating last year well before COVID-19 showed up.

The yield curve bottomed and turned up in August of 2019 as manufacturing was slipping, long-term yields were tanking and other economic signals were fraying in the wake of the trade war. So please, no convenient COVID excuses.

See: Yield Curve Hits New 2019 Steepener Today

They were preparing to inflate because the Continuum told them to prepare. COVID-19 dropped the final hammer on the situation and brought the inflation on quicker and more intensely than might have otherwise been the case.

Metals Ratios Continue To Indicate Inflation

So anyway, on to the lovable Amigos.

Metals Ratios Continue To Indicate Inflation

The Copper/Gold ratio is getting hysterical (despite nominal gold’s big day today) and overbought on the daily chart.

Metals Ratios Continue To Indicate Inflation

The weekly chart shows the congestion area that could at least temporarily halt the furious climb.

Metals Ratios Continue To Indicate Inflation

The Silver/Gold ratio has thus far held its breakout through the entire precious metals correction. As it stands now, that’s pretty impressive… and still inflationary. Gold is more monetary while silver has more commodity (and thus, inflationary) characteristics.

Metals Ratios Continue To Indicate Inflation

The weekly chart shows the longer-term picture of this still-constructive status.

Metals Ratios Continue To Indicate Inflation

Bottom Line

While Copper/Gold looks like it could blow off and either blow out or correct for a while, Silver/Gold has hung tough. Silver/Gold began to move in early March, before the hysterical rally in Copper/Gold was even a twinkle in the optimistic reflationary market’s eye.

It’s time to watch the Silver/Gold ratio for new forward indications, and let the industrial metals hysteria play itself out. But make no mistake, Copper/Gold is the tail and Silver/Gold is the dog. Not the other way around.

Check back to see my next post!

Best,
Gary Tanashian

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