Serendipity occurs only when you're looking for something. Solely those who are seeking a particular objective will experience chance encounters with evidence which reinforces - or disconfirms - the ideas that drive their thinking.As a present example, in today's reading, I note that Steve Saville has presented a thesis similar to my own, posted only yesterday.
At that time, on February 18, 2008, I postulated that a secular trend reversal in the 30-year "long bond" would signal a redirection of investor attention to inflation concerns, and that this in turn would drive renewed interest in precious metal mining companies.Interestingly, Steve Saville, in a post of the same date, notes that as thirty-year treasury bond rates begin to exceed five-year treasury note rates (indicating increasing expectations of longer-term inflation), the HUI to gold ratio tends to climb - meaning that gold stocks begin to appreciate relative to the price of gold.
As you have heard me say here repeatedly, Canadian gold stocks have dramatically lagged the price of gold since 2002.If Saville is right, that trend may now be changing.
Beginning in mid-2007, the thirty-year US treasury bond to five-year US treasury note spread began to widen dramatically. Saville asserts that the HUI to gold ratio tends to follow this trend with about a 6-month lag.If he is right, increasing inflation expectations will be driving precious metal mining equities higher relative to the price of the commodities they produce, and possibly in the very near term.
Mr Saville's chart is below.
Be sure to read Mr. Saville's article in full here, on the Safehaven website.
No comments:
Post a Comment