Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

‘Inflation Trade’ Alive and Well

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I don’t write the title because the precious metals took off Friday on the bad jobs report. Far from it. That is what gold is supposed to do under such circumstances as its fundamentals got a boost and the perceptions of a hawkish Fed got repelled.

I write the title despite the fact that the inflation barometer, TIP/TLT, tanked and commodities were moderate, post-jobs. Yesterday we noted: Inflation Expectations Sagging, including a declining TIP/TLT and a bullish looking TLT (each a form of non-inflationary signaling). Friday they got bearisher and bullisher, respectively.

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Pro-Inflation? Anti-USD?

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This is the opening segment from the May 15 edition of Notes From the Rabbit Hole, NFTRH 395. I am releasing it for public viewing because it seems, the title’s question has come roaring to the forefront this week. So the information (including the charts) is slightly dated, but becoming intensely relevant as of now.

We anticipated an ‘inflation trade’ or Anti-USD asset market bounce and this has been going on since mid-February. That was when silver wrestled leadership from the first mover, gold (which bottomed in December and turned up in January), and a whole host of other global asset markets began to rise persistently.

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Inflationist Gold Bugs Driving the Rally

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[edit] The post began as a simple view of the inflationary dynamics in play within the precious metals market but as sometimes happens it, err… expanded. Please excuse the wordiness. But I would rather be wordy and try to make points backed in facts and data than backed only by my biased ego.

Not that I have proof (re: the title), but I do have some charts to help make the point that people who bought gold and gold stocks due to inflation fears have been driving the gold sector higher since March.

Back in January and February HUI rammed upward amid much doubt and skepticism because the general market backdrop was bearish and even more importantly, the commodity focused ‘inflation trade’ was nowhere to be found. At that time we were calling the deflation story “long in the tooth”.

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Blow Off in Progress, But ‘Launch Phase’ Confirmed

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On March 4 we reviewed the technical reasons why the gold sector was launching as opposed to blowing off. This, after articles began appearing calling the rise to that point a doomed parabolic blow off using daily charts. Those calling it a blow off were confused; silver in spring 2011 was a blow off in the terminal sense. But when a parabolic move comes off a bottom, it is an impulsive thrust to change the trend, possibly ending the bear market.

We have long noted that gold is the first mover to a new inflationary phase, as the previous deflationary backdrop gets played out. That is exactly what happened, even though the silver miners have made stunning strides in leading the exciting up move in silver that is currently in process. Silver, in taking over leadership from gold would confirm an inflationary phase. Gold is monetary and silver is an industrial commodity with monetary aspects as well; i.e. it is more positively correlated to inflated economies making the silver-gold ratio a sensitive indicator to inflation.

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Silver Has Broken Trend, But…

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Very simply, the weekly moving average that contained silver through its bear market has been broken to the upside. That is another booster of our assertion from earlier in the year that any coming blow off would not be terminal (ref. early 2011) but rather the completion of a launch phase off the bottom. This will be the case as long as silver is above the weekly EMA 55.

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