Chart of the Week - Commodity Macro Signals
One of the most interesting charts on our radar right now...
Chart of the Week - Oil vs Gold Ratio Recessionary
Oil vs Gold: The crude oil vs gold ratio has peaked at a key level and turned down – threatening to break further lower. Aside from being interesting with respect to the relative attractiveness of gold miners vs energy stocks and relative trades within commodities, this chart is also interesting as a macro indicator…
If the global economy does rollover into recession, that’s going to be negative for energy demand and positive for gold safe-haven buying demand and associated gold macro tailwinds (lower yields, monetary easing). And it’s always important to think through the economic logic like this with these sort of charts and indicators.
So while a lot of markets are arguably not really pricing in recession just yet (ahem, credit, ahem), this particular indicator has shown a marked turn down reflecting the faltering macro pulse — with risk of further downside as recession looms.
And at this point I’d remind folk, we don’t get upset or excited by the stage of the business cycle — someone asked me the other day if I’m optimistic and I said “yes I am always optimistic …but in terms of the cycle, all the evidence points to recession”. And at varying stages of the cycle there are different risks and opportunities across markets, so back onto the investing implications of this one: energy stocks and energy commodities are arguably at risk, while precious metals and miners see upside.
Key point: The oil vs gold ratio is trending consistent with recession risk.
n.b. Check out the full archives of the Chart Of The Week for more charts.
Aside from the Chart Of The Week, this email gives you a brief overview of what was covered in the latest Weekly Insights report (this email provides a free preview of the Topdown Charts entry-level service on Substack).
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Topics covered in the latest Weekly Insights Report
Aside from the chart above, we looked at several other charts, and took a bite out of some really important macro/asset allocation issues right now:
Gold price outlook: waiting for a “trinity of breaks”.
Silver: similar to gold, with some interesting tactical signals.
Gold Miners: a look at valuations, positioning, technicals.
Gold Miners vs Energy Stocks: which sector is better?
Bitcoin vs Gold: in many ways echoing the stocks vs bonds setup.
Bank Stress Indicator Check: an update on the banking sector.
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Thanks for your interest. Feedback and thoughts welcome.
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Callum Thomas
Head of Research and Founder at Topdown Charts
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