Updating The Gold Mining Fundamental Macrocosm

Gold miners require a unique macro-economic backdrop

When gold stock bulls complain about a “smack down”, a “hit” or a “smash” against the poor gold stock sector what they should be thinking about is what a relatively small market the gold stock universe is compared to the multitude of galaxies populated by cyclical and risk on stocks and commodities and the massive bond market. The gold stock sector’s noise to trading volume ratio must be far and away the biggest bull market on the planet (I know because I am part of it :-)).

And once in a while the sector actually warrants all that noise. Like in 2001 when markets were beginning a bear phase and economies were faltering. Like in Q4, 2008 when gold stocks were crashing to unwind previous inflationary excesses, leading stocks and commodities into a terrible crash and rebounding first. Like in March of 2020 when the miners crashed and ‘V’ bottomed to lead what is to this day an ongoing economic recovery born of the inflation that gold and gold stocks first sniffed out.

And that is the rub. Personally, I have been favoring the prospect that a strong bull market (target: 500) after initially projecting an A-B-C upside correction target of 375 in 2019, which we put in the books at 373.85 last August. But in order to continue favoring an ongoing bull market scenario the macro fundamentals must play ball, and play ball they have not since last summer. Hence, the A-B-C upward correction and ongoing bear market scenario gains strength with each passing month of positive economic activity, regardless of the inflation it was created with.

(Click on image to enlarge)

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Enter once again the Macrocosm, because it is time for a reminder to myself if not you that in order for the gold stock sector to be anything special, the macro must rotate negative. Speaking of rotation, it has been rotating alright, but with yields and inflation signals fading that rotation is not into a deflationary situation that would produce a big gold stock buying opportunity but is instead something of an interim Goldilocks scenario (easing inflation expectations, firming USD, Tech and Growth bid up, etc. while the economy remains okay).

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