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George Tsiourvas

George Tsiourvas

George Tsiourvas is the founder and editor of The Macro Navigator. He was born and raised in Stuttgart/Germany and moved to the London/UK in the…

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Weekend Update Part II

Yesterday we had a good look at Gold versus major asset classes over the last few decades. We observed that pretty much all major asset classes have been underperforming precious metals from 2000 onwards, long term trends that get interrupted for several months just to resume again. Today we will zoom in a bit, to have a look at what's likely to happen over the next few days and weeks.

The CRB, a basket of commodities, has been declining in Gold terms over the last few years. We have been trading below its March 2009 low for quite some time now and currently we might be in the process of breaking down again. Since the last rally failure in early 2011, it has been trending lower strongly again. Should this ratio keep dropping a deflationary outcome across markets seems inevitable.

CRB versus Gold
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If this chart turned up and moved higher, only then, there would be an indication of an inflationary outcome. This would consequently mean that Silver would be a likely candidate to take the lead. Let's have a look: We c an clearly see the series of declining tops since Q2 2011. It's been a vicious decline with Silver losing half its value in USD terms. In response to (probably unjustified?) inflationary expectations on inflationary central bank interventions that lifted the stock market higher recently, Silver moved higher to outperform everything else for the last 2-3 weeks. Should there be any freshly printed central bank paper finding its way into the market Silver will without any doubt keep rallying higher. For some reason though I do not think it will happen yet. It's definitely decision time though. Have a look for yourself.

Silver Daily
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Silver has also been outperforming T-Bonds and Gold for several weeks now. If that goes on this will have very inflationary implications. However, for the moment, based on the charts below, we can expect at least a pause. Gold, T-Bonds as well as the USD are due a bounce against Silver.

USB versus Silver
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It's deeply oversold. And so is Gold/Silver. It's been a slow drift and then a quick slide. It's decision time here as well.

Gold versus Silver Daily
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Clearly this chart also suggests that we are at a crossroads these days. Higher would see all asset classes decline in USD terms. Lower means cheap money stays with us for longer and asset prices will most likely advance further. On the other hand we are observing "growth" type asset classes like the CRB, not managing to outperform Gold. A harsh interpretation if we now concluded QE just creates money and destroys value...

Have a nice Sunday!


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