|As the Cyprus drama and other macro events play out and distort normal macro economic signals to varying degrees in the short term, let's review the 'real price' of counter-cyclical gold vs. the cyclical industrial metals.|
Au-GYX bottomed hard in February, MACD sported a positive divergence and now the ratio has turned up hard, despite the economic growth signs in the U.S. Global growth, especially in materials-intensive China has decelerated.
Regardless, the Cyprus hysteria has driven the ratio up to an over bought level at the SMA 200, which is a logical area for a pullback. Au-CCI is on a long-term up trend but periodically spikes down when people (and mainstream economists) get giddy about economic growth. Today they are giddy. But a chart is in an uptrend until it no longer is. This one would have to impulsively violate the top shaded support level to reverse the trend.
In a way similar to how the AMAT-SOX ratio (or semi-equipment stocks to broad semiconductor sector ratio) that can be a Canary to a Canary in a coal mine, so too can the gold-silver ratio (GSR) be a more sensitive indicator to coming liquidity problems that would eventually be more broadly seen across the spectrum of gold's ratios to things positively correlated to the economy. Here's the GSR, is approaching an important decision point. A break upward and liquidity is going to come screaming out of the markets, with a deflationary backdrop the likely play. A break downward and rising inflation fears would be likely.