I don’t make a habit of pumping the most frustrating stock sector on the planet just for the sake of it. I have made a habit of discussing why, since 2003, the macro market backdrop has been adversarial toAs you can see, the HUI/Gold ratio made a top in 2003 and has been down and flat ever since. Personally, I believe it made a double bottom earlier this year. I don’t believe that because I want to . I believe it because of macro developments currently in play.
Gold is less effective than many other assets when inflation created by monetary and/or fiscal policy is working to the benefit of the economy, which save for a few cyclical bear markets of the last quarter century, has been the case. In essence, for policymakers and the Keynesian system itself, it was “inflate or die”. They routinely chose “inflate” because the bond market was not only permissive of inflation, it was demanding it ., which would be a tailwind for gold and miners, but also potentially for those touting an economic “soft landing” and a stock market resurgence before the coming bear market engages. I am also expecting the trend change in Treasury yields to hold.
Back on the gold stock macro, and with reference to the bullet points above, gold is working on flipping the macro counter-cyclical and anti-cyclical inflation. This weekly chart shows gold still battling to assert over stock markets , but breaking out vs. commodities, includingMy long-held view is that a counter-cyclical macro and in Bob Hoye’s words, a “post-bubble” macro needs to engage for gold stocks to be uniquely positioned for positive performance.