Copper/Gold Ratio leads them all

There is a skew in probability that the Copper/Gold ratio breaks and leads the next directional move for bond yields.

So while credit may lead equity…….the copper/gold ratio (HG/GC) leads credit.

While I watch the HG/GC closely, a move lower in this ratio bodes well for my call that interest rates move lower and in turn, a further decline in the HG/GC adds to my thesis that inflation also abates.

I reiterate my view that I think the Fed raises rates 3 (or 4) times and then cuts once, at a later date, perhaps by mid-2023.

Market forces and a slowing economy could mean G7 central banks don’t raise rates as aggressively as 7 or 8 hikes that the broking houses have been forecasting.

In the chart below, the U.S. 2 year note yield is in ‘dark blue’ while the HG/GC ratio appears in ‘light blue’.

I also encourage readers to search for older posts that I’ve written referencing the HG/GC.

May 19, 2022

by Rob Zdravevski

rob@karriasset.com.au