Best of the Week
Most Popular
1.What Happened to the Stock Market Crash Experts Were Predicting - Sol_Palha
2.London Housing Market Property Bubble Vulnerable To Crash - GoldCore
3.The Plan to Control ALL Your Money is Now at Advanced Stage
4.Why Gold Is Set For An Epic Rally This Spring - James Burgess
5.MR ROBOT NHS Cyber Attack Hack - Why Israel, NSA, CIA and GCHQ are Culpable - Nadeem_Walayat
6.Emmanuel Macron and Banking Elite Win French Presidential Election 2017 - Nadeem_Walayat
7.Trend Lines Met, Technical's are Set - US Dollar is Ready to Rally (Elliott Wave Analysis) - Enda_Glynn
8.The Student Debt Servitude Sham - Gordon_T_Long
9.Czar Trump Fires Comey, Terminates Deep State FBI, CIA Director Next? - Nadeem_Walayat
10.UK Local Elections 2017 - Labour Blood Bath, UKIP Death, Tory June 8th Landslide - Nadeem_Walayat
Last 7 days
Bitcoin Price Goes Loco! Surges through $2,500 Despite Unclear Fork Issues - 25th May 17
The US-Saudi Arms Deal - Sordid Saudi Signals - 25th May 17
The No.1 Commodity Play In The World Today - 24th May 17
Marks and Spencer Profits Collapse, Latest Retailer Hit by Brexit Inflation Tsunami 2017 - 24th May 17
Why Online Trading Platforms Are Useful for Everyone - 24th May 17
The Stock Market Will Tank Hard - 24th May 17
It’s Better to Buy Gold & Silver When It DOESN’T Feel Good - 24th May 17
Global Warming - Saving Us From Us - 24th May 17
Stock Market Forecast for Next 3 Months - Video - 23rd May 17
Shale Oil & Gas Production Costs Spiral Higher As Monstrous Decline Rates Eat Into Cash Flows - 23rd May 17
The Only Metal Trump Wants More Than Gold - 23rd May 17
America's Southern Heritage is a Threat to the Deep State - 23rd May 17
Manchester Bombing - ISIS Islamic Terrorist Attack Attempt to Influence BrExit Election - 23rd May 17
What an America First Trade Policy Could Mean for the US Dollar - 22nd May 17
Gold and Sillver Markets - Silver Price Sharp Selloff - 22nd May - 22nd May 17
Stock Market Volatile C-Wave - 22nd May 17
Stock Market Trend Forecast and Fear Trading - 22nd May 17
US Dollar Cycle : Deep Dive - 21st May 17
Bitcoin Breaks the $2,000 Mark as Cryptocurrencies Continue to Explode Higher - 21st May 17
Stocks, Commodities and Gold Multi-Market Status - 21st May 17
Stock Market Day Trading Strategies and Brief 20th May 2017 - 21st May 17
DOW Needs to Rally Big or Correction is Next - 20th May 17
EURUSD reaches DO or DIE moment! - 20th May 17
How to Get FREE Walkers Crisps Multi-packs! £5 to £28k Pay Packet Promo - 20th May 17
UK BrExit General Election 2017 - Will Opinion Pollsters Finally Get it Right? - 19th May 17
Gold Mining Junior Stocks GDXJ 2017 Fundamentals - 19th May 17
If China Can Fund Infrastructure With Its Own Credit, So Can We - 19th May 17
Evidence That Stocks are More Overvalued than Ever - 19th May 17
Obamacare May Become Zombiecare In 2018 - 19th May 17
The End of Reflation? Implications for Gold - 19th May 17
Gold and Silver Trading Alert: New Important Technical Development - 19th May 17
Subversion And Constructive Synthesis Of Capitalism And Socialism - 18th May 17
Silver: Train Leaving Station Soon! - 18th May 17
Credit and Volatility Signal That Financial Conditions Are Very Overheated - 18th May 17
Another Stock Market "Minsky Moment" or Will the Markets Calm Down? - 18th May 17
WannaCry Ransomware Virus Is a Globalist False Flag Attack On Bitcoin - 18th May 17
Euro, Stocks, Gold Momentum Extremes All Round! - 18th May 17
US Stock Market Slumps on Establishment / CIA Trump Impeachment Coup Plan - 18th May 17
Tory Landslide, Labour Bloodbath - Will Opinion Pollsters Finally Get a UK Election Right? - 17th May 17
The stock market sectors which are breaking out in 2017 - 17th May 17
A ‘Must-See’ Chart for Gold and Silver Aficionados  - 17th May 17
Will the SPX Stock Market Final Surge Fail to Appear? - 16th May 17
Claim your FREE copy of Jim Rickards’ explosive book - 16th May 17
GOP Establishment Elite Plots Trump Removal - 16th May 17
Walkers Crisps Pay Packet Cheats, Shoplifters and Staff Conning Customers - 16th May 17

Market Oracle FREE Newsletter

Why 95% of Traders Fail

A Look at the Silver/Gold Ratio, Inflation/Deflation and the Yield Curve

Commodities / Gold and Silver 2017 May 12, 2017 - 03:43 PM GMT

By: Gary_Tanashian

Commodities

An email from a reader (of the eLetter, I think) calling me out on trying to make too many correlations in a dysfunctional market (I think that was his bottom line point, and he’s got a good point) got me thinking about the Silver/Gold ratio and some pretty interesting post-2011 dysfunction (so it seems) in the markets.

Markets that made sense in certain ways prior to 2011 no longer make sense in the same ways. For instance, the S&P 500 used to be correlated to the Silver/Gold ratio, which itself was positively correlated to inflation and/or inflationary economic growth. Gold also liked for silver to be leading it, not the other way around.


But in 2011 a Goldilocks environment was rammed home by Ben Bernanke’s decree (in September of that year) that the Fed would “sanitize” (his word for manipulate, coerce and completely screw up bond market signals that had been tried and true) inflation and its indicator signaling right out of the picture. The Fed’s ‘Operation Twist’ buying of long-term Treasury bonds and selling of short-term Treasury bonds forced a yield curve that had been out of control to the upside, downward. Brilliant!

In 2017 it’s the gift that keeps on giving, from dear old Ben as the resultant yield curve downtrend has been relentless and it has been stock bulls that have benefited despite the 2015 disturbance that temporarily shook a lot of people out of stocks. To be sure, Goldilocks has not only been Fed-induced, but also has benefited from global deflationary forces that now appear to be resolving toward an inflation phase in many global regions (here we again note Kevin Muir’s sound thought process about Europe potentially doing the US monetary policy thing).

Gold and silver, followed by commodities had once been obvious choices for inflationary phases, but now with the Fed out of tricks in its bag (leaving the heavy lifting to the Trump administration’s fiscal/reflation policy making), trying take back previous inflationary monetary policy (by slowly tightening) and the yield curve declining, it’s all good for now.

On this cycle (2011- ?) the inflation has clearly manifested in stocks. Funny money on the run, after all, is not discriminating money. It seeks assets… period. With gold having been harpooned due to the lethal combo of over-speculation and Bernanke’s not so gentle twisted shove in 2011, the stock market was a layup (in hindsight, at least) in 2011; it was the path of least resistance.

Will the next turn up in the curve be inflationary or of the deflationary liquidation variety? That will likely be determined by what nominal yields are doing at the time. Either way, a rise in the yield curve could be supportive for gold simply because a) gold often works well during inflation and b) because gold is currently wearing it risk ‘off’ suit, in the event an upturn in the curve is deflationary. In that latter event its price might not move up much, and could decline, but it would sure as hell retain value better than the stuff that has received the inflationary bid, post-2011.

Subscribe to NFTRH Premium for your 40-55 page weekly report, interim updates and NFTRH+ chart and trade ideas or the free eLetter for an introduction to our work. Or simply keep up to date with plenty of public content at NFTRH.com and Biiwii.com. Also, you can follow via Twitter ;@BiiwiiNFTRH, StockTwits, RSS or sign up to receive posts directly by email (right sidebar).

By Gary Tanashian

http://biiwii.com

© 2017 Copyright  Gary Tanashian - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Gary Tanashian Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife