The economy is still healthy

The direction of the Copper/Gold Ratio (HG/GC) is a good indicator for checking on the health of the economy. Think of it as a thermostat.

It is also well correlated to the direction of the U.S. 10 year (the 10’s) bond yield. Often, the HG/GC precedes the move in interest rates.

In a recent post I wrote about the HG/GC’s relationship to the S&P 500.

Today, the short-term direction of the Copper/Gold Ratio has been down and so the 10’s (and S&P 500) have mimicked that.

The longer trend upward trend of the Copper/Gold Ratio remains intact.

Where this ratio trades to and its effect on the 10’s will determine the size of, and where the allocation of capital moves to.

Separately, (on a weekly basis) the 10’s have traded down to 3 standard deviations below its mean. Such a 3-sigma event has foreshadowed higher equity prices.

It’s at an acute point, however the equities bull market continues.

July 21, 2021

by Rob Zdravevski

rob@karriasset.com.au