GoldNuggets — Big Picture Moves
Consolidation Culmination
The big news in precious metals land of course has been the initial breakout in gold — it seems gold is finally shaking off that 5-month consolidation phase.
I will caution though that this breakout has happened while US banks and exchanges are on holiday (Labor Day), so the next few days are going to be absolutely critical to see if the breakout can hold (vs fold).
If this breakout holds it’s going to be simply a case of onwards and upwards. $Gold - main 2512(GCmain)$
Issues in Valuations
On the other hand, one of the key charts in the pack is that of valuations (and p.s. I asked the adobe AI to tell me the most interesting charts in the latest monthly pack pdf, and it came up with some very interesting and surprisingly good answers! —so a tip for subscribers: try asking AI about the monthly gold market chartbook pdf :-)
The key issue is the composite valuation indicator is showing up as significantly expensive. But the key offsetting factors are three: 1. technicals still look strong; 2. monetary tailwinds (fiscal largesse, debasement, reserves diversification) are still significant; and 3. the gold-drivers value indicator (blue line below) is still cheap (i.e. the USD is expensive and can go lower [bullish gold], and bonds are cheap and therefore real yields could go lower [bullish gold]).
So it is something to be mindful of, but as they say: expensive markets can get more expensive…
[see also: Gold Valuation Indicators — Theory & Practice]
Reserves Reverse
As noted, a key force behind the global gold bull market has been central banks reserves diversification.
As Tavi notes: “Foreign central banks now officially hold more gold than US Treasuries — for the first time since 1996. Let that sink in. If you think this buying streak is ending, just look at what happened in the 1970s. This is likely the beginning of one of the most significant global rebalancings we've experienced in recent history, in my view.”
Stocks vs Gold
And that could mean big things for gold relative to stocks… as Ronnie notes: “120 years of history say it loud: Did the S&P 500 / Gold ratio just roll over? To mean revert back to its long-term average (1.14), gold would need to triple.
Every past collapse (1930s, 1970s, 2000s) = gold’s biggest bull runs.” (source)
Although I would note for completeness: technically you could also get mean reversion by stocks slumping and gold either holding ground or falling less than stocks (and stocks do look a bit frothy).
Gold vs Major Assets
Finally, here’s another angle on gold vs stocks (this is showing it the other way round i.e. the ratio of gold to stocks; *and* in total return terms; i.e. including dividends for stocks, and interest for cash/bonds). (source)
See if you can spot the odd one out…
For whom haven't open CBA can know more from below:
🏦 Open a CBA today and enjoy privileges of up to SGD 20,000 in trading limit with 0 commission. Trade SG, HK, US stocks as well as ETFs unlimitedly!
Find out more here：
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
