Loading ...Gold PM Sector and credit cycle YC2YR
Credit spread Yield curve YC2YR clearly shows credit cycle can have different outcome on PM sector.
Between 2003 and 2008 Gold to silver ratio continue to drop with flattening of credit spread and bottom around 2008. PM sector was in bear market rally.
Compare that to period 2010 and current flatnning of YC2YR GSR continued to rise and remains high.
PM sector behaved differently during similar cycle.
For PM sector investor/trader key indicator is to watch GSR. Below is YC2YR vs 9ema GSR line chart.
I love these charts Bikoo! They would merit a podcast so you could walk us through all the details. A novice.. or even expert would miss some of them, lot’s of details there.
Thanks Patrick.
Roll of GSR in economy has been: the gold/silver ratio has been a reliable indicator of credit conditions. It declines during a boom and does its greatest service when it typically signals the credit contraction by increasing.
Post 2012 this roll has reversed. ??
In 20032-2003 economy was in recession ansd so as GSR was higher. Present economy is booming yet GSR remains high longest at high level in history.
This significant transition took placed in 2010-2011. A surprise GSR move down due to speculation in commodity while credit spread was still widest. That was titanic shift to change GSR relation with Yield spread form positive to widenning now.??
As Yield spreads widens across the treasury maturity (30yr, 10yr, 5 yr. 20, 3month T bills) gold to silver ratio may start declining.
Only charts tell us the shifting relationships.
To avoid the noise and add clarity to relationship, 9ema line is used for GSR against the yield spread between 10 year vs 2 year treasury. This is most watched yield curve by financial / money managers worldwide.
Additional reading:
https://tsi-blog.com/2018/08/another-look-at-the-us-yield-curve/