Real gold mining macro fundamentals are believed to matter a lot. Here are several things that do not matter, or at least should not matter when considering a bullish view of the entire gold stock industry (GDX, ARCA Gold Miners):
Cyclical Inflation
Inflation is mostly hyped by gold stock perma-bulls as a reason to buy. When inflation is working greatly to the benefit of the economy it mostly is not the time to buy. That is the time to be cautious of such promos and to mainly avoid gold mining stocks (gold royalty firms have a different set of fundamentals).
For instance, when mining cost input prices of crude oil/energy are outpacing the mining product gold, well, you can do the math. It was not surprising in the least how badly gold stocks performed from mid-2020 until Q4, 2022 as the inflation hysteria seemed to take hold.
Understandably, as we started planning for the end of the inflation phase the miners bottomed and turned up in late 2022. It is too simple to be much confusing to many people. After some time, you can readily spot promotional entities by their habit of coming up with reasons to be bullish regardless of the macro backdrop.
War And Terror
Sure, gold can get a knee-jerk rally at any given time that fear overruns its bounds, but that is always corrected ideally and reversed without real fundamentals being absent. It is the stuff of the day traders and fearmongers.
Not many people think gold should have anything to do with the sordid stuff. All the precious yellow metal does is hold value over centuries as highlighted in many posts on the internet.
China Love Trade And Indian Wedding Season
This is a pure promo from some of the highly imaginative gold salesmen and women. Sure, there are demand and supply dynamics in play here but a casual review of recent decades indicates that China and Indian love do not stand up to the real macro fundamentals.
Central Bank Buying
If you are here to ignore the fact that for each buyer there is a seller. It is a net wash and central banks have now proven to be no smarter than any other entity.
What now matters in the current environment is to be a great way to view their macro fundamentals not just for gold, but mostly for gold stocks, which leverage gold’s standard in the macro. In general, the bigger the planet the more important the fundamental consideration.
Here is a highlight of some market-based gold ratio indicators of the proper gold mining macro fundamentals (pointing to the daily charts), considering that gold miners leverage all the indicators to the downside (all too often) and upside (as projected for 2023).
Gold/SPX
Steady gold uptrend compared to US stocks (S&P 500). A macro/sentiment/psych positive for gold mining.
Gold/ACWX
A spike on the upside and flag measured in global stocks ex U.S. (ACWX). This is a possible trend change to the upside.
Gold/WTI Oil
Looking at the daily uptrend, recently hammered by the OPEC price manipulation of the oil market. A positive for gold mining industry fundamentals if and as the trend holds.
Gold/Copper
Gold is now reasserting its long-term uptrend in copper terms and might turn the intermediate (SMA 50) daily trend back up. China is reopening and surging economy? We do not believe so. At least not as will pertain to the world economy and gold miner fundamentals. That is a picture of a counter-cyclical metal reasserting versus a cyclical one.
Gold/CRB Index
Gold is strongly trending upward in wider commodity terms and with the recent oil manipulation is majorly flying a bull flag to test the trend. Bullish for the counter-cyclical view and gold mining fundamentals.
Gold/XLB
Gold/US Materials industry (XLB) spiked and flagged. It is a possible trend change from neutral to up. Thus, a change from a counter-cyclical metal in relation to a very cyclical stock industry.
Gold/UDN
Gold versus a measure of global currencies (an anti-USD fund) (UDN) is reasserting its uptrend. The old saying is that this is not a real gold bull market unless it is rising in all the currencies and that is valid.
Gold/RINF
Gold versus the very thing most people falsely think is the primary reason they must buy gold, inflation or in this specific case inflation expectations (RINF). It is possibly a new uptrend and one we have been expecting since Q4, 2022.
Gold/Silver (GSR)
Ultimately, what would any gold ratios article be without a view of the old monetary man versus his impulsive little brother, who is cyclically inclined and therefore, inflation sensitive? The gold/silver ratio is neutral, at its very best.
That is fine for the gold miners at this time since silver mostly results in bullish phases in the precious metals complex. When the GSR turns up, nonetheless, it will be wise to prepare for a volatility phase in the precious metals and a resumed bear phase elsewhere.
