Long Precious Metals vs Cyclical Commodities

22.06.2022 – Economic data are getting worse and worse. The Michigan Consumer Sentiment fell to the lowest level ever. A coming recession is quiet likely. In this environment precious metals are a far better place to be than cyclical commodities. The gold/copper ratio is now confirming the thesis and is showing a clear breakout from the bottoming pattern.

Looking at the monthly chart we just got a monthly MACD crossing from very oversold territory. In all these occasions we saw at least a 60% outperformance of gold vs copper. 

When the gold-silver ratio collapses, silver outperforms gold. All major uptrends in gold coincide with a massive collapse in the gold-silver ratio. The fact that the GSR is at resistance and in a bearish rising wedge pattern looks very constructive and adds an important piece to the puzzle. 

Another very important aspect is the Commitment of Traders Report of Silver. Commercials (red) 
are nearly always on the right side of the trade. Large speculators (green) are almost always on the wrong side. With the recent decline in silver prices, commercials (smart money) are unwinding their silver shorts in a manner not seen since the 2019 lows. That is really encouraging. 

Looking at the daily silver chart there is a decent change that we just saw a false break down of the horizontal support line. This could lead to a slingshot move higher in silver. 

Sentiment for silver is in the absolute basement and lower than the last 3 years. Even lower than the March 2020 crash. This is a really asymmetric setup where sentiment, economic cycles, charts and COT data are all pointing to the next leg up. That's why we are overweight in silver right now.