A Bubble in Gold?

Not even started yet vs. Fed-fuelled stocks...

THRILLS and spills ahead. It's a bull market, baby, writes Gary Tanashian in his Notes from the Rabbit Hole.

Or per Old Turkey, "It's a bull market, you know."

But the supporting theme is the new macro and its new rules that we've anticipated since the 30-year Treasury yield Continuum broke to the upside in 2022.

Since then the job has been to interpret the implications of this big picture macro trend break, along with other indicators of major change.

The long-term SPX/Gold chart below hearkens back to the 1970s. So, in essence, does the Continuum's long disinflationary trend above, which was birthed in the 1980s after Fed chief Volcker whipped inflation through very hawkish interest rate policy.

The then-new trend in disinflationary bond market signaling allowed policymakers of subsequent decades to routinely paint prosperity into the macro at will.

This was most obvious during the 'Inflation onDemand' era, launched compliments of Alan Greenspan, post-2001. But that was not real prosperity. It was inflationary policy, given license by the long bond's decades of disinflationary signaling (thank you, Volcker), a license that became ever more abusive post-Greenspan.

It was the core reason we now have a society so divided. As I have written many times, it is the act of inflating money supplies and monetary aggregates through bond market manipulation that has fabulously benefited the wealthy and routinely impaired the not wealthy. This is the root of our social problems.

In modern day reality TV America, the easy target is the other political party. And why not? They are both bankrupt of truly transformative ideas that would be helpful to a healthy society. They are little more than corporate divisions of particular ideologies that in my opinion are way past their shelf lives, as currently practiced.

So the Everyman blames the other side of the aisle, because the Everyman is programmed that way. We are TV programmed as a whole, while alternate media from YouTube to Substack to X put forth everything from sound, progressive and thoughtful ways forward to utter ignorance and hatred. But at least they are saying what they think. Unlike major media, saying most often what its corporate boardrooms think.

Well, that programming is done. It's just that a vast majority don't know it yet because a vast majority don't know that the macro framework has changed or more importantly, the implications of that change. The bond market signaling circa 1987-2022 is done. The stage is set for the preeminent monetary asset to rise as monetary policy is rendered more dysfunctional than the pre-2022 era.

This is my ideology speaking. I've quietly held this general ideology for decades. But now, it is time. This chart of gold in relation to the S&P 500 shows the profound changes in the monetary value asset vs. the prime inflation-stoked paper asset. It also shows that on the big picture, we ain't seen nothin' yet.

This very long-term chart of the SPX/Gold ratio shows the case for major stock market under-performance, even if nominal prices go sideways.

A bubble in gold? Gold has not even gotten going yet on a relative basis to the market that benefited from all of that inflationary policy, pre-2022.

In the short-term, gold stocks are at a target and a classic technical halt/correction point. A correction from such an overbought state could feel quite severe. That's the TA. Know if you're a trader or a holder.

But there are other options in play here, from upside laser show to chop & grind. The former does not feel as likely as the latter.

Regardless, per the changes to the macro that became symbolically evident in 2022, and especially per gold's long-term status vs. the stock market, it's likely early innings in the bull market.