EC Monthly Macro Monitor – June 2020

The longer-term view shows that while the dollar has been strong, most of the gains were way back in 2014. There was surge right after Trump’s election but that only lasted a few months. For now, all we can say is that the dollar remains fairly strong against its major counterparts. Our economy isn’t great but it is still better than the alternatives.

The broad dollar index shows even more strength although it has backed off the highs.


Gold is up on the year but had some troubles during the most intense part of the crisis. It has stalled since mid-April and underperformed stocks recently. Gold is another asset that doesn’t agree with the economic optimism of the stock market.

Gold has been in an uptrend since 2016 but it really accelerated in late 2018. It is now bumping up against the highs from late 2011 when QE was stoking inflation worries. Getting through resistance would probably require more dollar weakness.

Commodity Indexes

Commodities have come off their lows, but are still quite depressed. Oil has led the way but copper is also in a short-term uptrend. Again, the message is that yes, things have mostly stopped getting worse, but there is still a lot of slack.

If the recovery does accelerate there is a lot of upside for this asset class. Just getting back to the previous downtrend would require a move of roughly 90%.

Copper: Gold Ratio

The copper to gold ratio has also recovered from the lows but is still well below the long-term trend. Bond yields have lagged the recovery in this ratio but which market proves right is something I can’t predict. Either this ratio will fall because growth proves disappointing. Or rates rise as the recovery accelerates.

Gold:GSCI Ratio

The gold to GSCI ratio shows a similar picture with general commodities outperforming recently but with gold having the upper hand longer-term.

On the other hand, this long term chart looks like an exhaustion move to me. Will gold fall or will commodities rally? That depends on growth.

Identifying the correct current economic environment is critical to getting asset allocation correct. We spent most of the last cycle in that first column with steady growth and a strong dollar. The recession pushed us into the far right column. Stock buyers today are assuming we will return to the previous regime but the evidence of that is still pretty thin. The dollar is still strong – although weakening recently – but evidence of growth is still quite thin and not supported by most of the market indicators we monitor.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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Edward Simon 5 months ago Member's comment

No safe haven or are US Treasuries still it?