Gold-Silver Ratio and its Implications

By: Gary Tanashian | Thu, Dec 1, 2011
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Flipping the Silver-Gold ratio on its head, we find the GSR in a nice uptrend after it was clobbered down and out of its bottoming pattern last year by the Vampire's QE2 policy announcement. Once the bottoming pattern broke in the GSR, NFTRH abandoned the intense risk management and rode to a nice solid +42% return in the speculative portfolio. Thank you Ben.

Now, the GSR would be hammered down again by the global monetary fixers. Hey, they think they can control our worlds at will, after all. But for now, GSR remains in an uptrend and as long as it remains above the green shaded support zone, it paints the Santa party as a bunch of drunks at the punch bowl back slapping, telling crude jokes and not much more.

In other words, they have likely created another counter-trend move, that will be unwound shortly after the holidays on the near end or, if they really get the suck in going again, after the President is re-elected on the far end.

Alternatively, if they break the GSR down and send it back to the hell it came from, enter the pervasive 'El Hyper' noise, which would take the place of the deflationary depression discussion that has dominated since the Long Bond's yield turned down early in the year.

$TYX 30-Year T-Bonds Yield
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There is no guarantee that the system will not break one way or the other at any given inflection point, but thus far over the decades that the 'continuum' has been in force (post-gold standard and 'gold window' closure) casino patrons have stood to be played by the dynamics within the parameters shown in the chart above. Each green arrow has represented a reloading of the inflation gun, renewed power for the Wizard and/or an invitation to the Vampire. You see? Choose your metaphor, but be on the right side of this thing.

Edit (11:19) Of course, there are always disbelievers, and that is everyone's right; to go forth with what works for them. The continuum on which the markets periodically pivot plays out in months and years, not days and weeks. There may be nothing actionable happening in the GSR right this moment, but it is what is down the road that we are interested in, along with what is happening right now. I never like to see this type of chest thumping in the face of a potentially significant market risk and liquidity signal, no matter how safely out in the distance it may be. But again, to each their own.



Gary Tanashian

Author: Gary Tanashian

Gary Tanashian

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