GoldNuggets — Oil vs Gold and More
GoldNuggets Digest: oil vs gold ratio, oil and gold vs other commodities, silver price technicals, platinum market update, commodity capex crowd-out...
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Oil vs Gold
Stepping back from the extreme volatility in oil prices today (down almost 10% at the time of writing, following so far only limited response by Iran to the weekend US bombing run on Iran’s nuclear facilities) — the bigger picture here is that oil has reached what appears to be a low point vs the gold price. (source)
In all my experience in markets and all the charts I’ve studied, I can say one thing with confidence: pay close attention when you see extremes like this (particularly when they start to turn).
Oil & Gold vs Other Commodities
Here’s another angle on it, but breaking it out into Crude Oil vs other commodities (equal-weighted) and the same for gold. (source)
This way of looking at it is insightful because it shows how the extreme level in the chart above has arisen due to both legs (i.e. crude oil making major relative lows vs other commodities, and gold making major relative highs — and both seeing initial exhaustion of both moves).
If I had to bet one way or the other I’d be betting on oil vs gold just given how stretched the rubber band is at this point.
Silver Lines
Elsewhere, Tavi Costa of Crescat Capital comments “Silver is on the verge of a major breakout, in my view, from one of the longest cup-and-handle formations I’ve ever seen.“ (source)
Big if true, watch this space…
Platinum Punching Higher
The breakout in platinum prices has proven explosive so far, it just goes to show that when you get a breakout from a large technical pattern like this it can go fast and far. How far it goes from here is anyone’s guess. (source)
Commodity Capex Crowd-out
I mused the other day on Twitter/X: “Tech stocks are taking up a growing share of corporate capex spend ---but are we investing enough in real world supplies/materials to fuel and build our future? And for that matter, if we're underinvesting in commodities, maybe commodities are actually the place to be...“ (source)
Yet another clue for commodity super-cycle seekers.
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Great charts Callum. I hear what you are saying on the oil vs. gold chart, but I'm just not sure that the data generating process underlying it is stable. Gold is supported by a long-term lack of investment in exploration and development, leading to minimal long-term supply growth amid exploding demand arising from monetary instability/debt-deficits.
While oil faces significant headwinds as the conversion of the global automobile fleet from ICE to BEV/Hybrid continues apace. The fact that we couldn't hold $80/bbl even with Iran lobbing missiles into Qatar, threatening the Straits of Hormuz and US striking Iran is deeply bearish, IMHO.
Gold, meanwhile is treading water despite a surge in US equities/fall in the VIX index, which normally would have seen a 'healthy' correction.
Right now, I am 6/10 bullish gold, but 8-9/10 bullish platinum and silver. If you are right on the industrial cycle turning up, platinum and silver are going to run.
Do you think this trend is sustainable, or are we on the brink of a convergence?