#10. Gold Miners, Escape from Hyper Correlations

-

 

#10. Gold Miners, Escape from Hyper Correlations

Gold miners had a very volatile year as well. Like gold and silver, the gold miners also had a downside overshoot due to severely poor market trading liquidity. All equities (not just gold equities) had a high level of intra-stock correlation due to the Fed tightening financial conditions (higher USD, higher real yields, lower liquidity). The 30-day rolling correlation between gold miners and the S&P 500 reached its highest level in 10 years, meaning broad market pricing flows dictated gold miners' price action, not fundamentals. Since the Fed signaled the aggressive portion of its interest rate hikes is over, there has been an unclenching of hyper-correlation across asset classes as fundamentals reassert themselves. Figure 7b is the Q4 2022 returns for various asset classes. It highlights the now diverging returns of the “better" asset classes (precious metals) that we believed were caught in the liquidity vortex versus fundamentally problematic asset classes.

Figure 7a. Gold Miners Index, Recovering Quickly from Undershoot (2013-2022)

Figure 7a. Gold Miners Index, Recovering Quickly from Undershoot (2013-2022)

Source: Bloomberg. Data as of 12/31/2022. Included for illustrative purposes only. Past performance is no guarantee of future results.

Figure 7b. Q4 2022 Returns Released from Hyper-Correlations

Figure 7b. Q4 2022 Returns Released from Hyper-Correlations

Source: Bloomberg. Data as of 12/31/2022. Included for illustrative purposes only. Past performance is no guarantee of future results.


Gold is a bell-weather asset class.

Comments

Post a Comment

Popular posts from this blog

Fossil Fuel not dead yet

-
Image
Fossil Fuel not dead yet “Old energy” will carry most of the load during the early years of the transition, as it guides “new energy” to the pinnacle of global power production. Producing an electric vehicle (EV), for example, requires about twice as much energy as producing an internal combustion engine vehicle. That’s because EVs are essentially batteries on wheels… and batteries are basically just hunks of metal. Mining and processing all of that metal demands a lot of energy. To unearth enough raw ore to produce a  single  midsize EV battery, for example, mining operators must excavate about 250 tons of terrain. After that, they must transport roughly 50 tons of ore to various facilities around the world that can extract the targeted metals and then refine them to battery-grade standards. With a few exceptions, every step of the process consumes some form of fossil fuel. Most other renewable technologies are even more energy-intensive than EVs. Therefore, far from replacing fossil
Read more

3D Printing

-
  3D Printing 3D printing saves time, Cost, and Waste while creating radically new parts.  3D printing is a form of additive manufacturing that builds objects layer-by-layer. 3D printing reduces the time between design and production, moves power to designers and reduce supply chain complexity and at a fraction of the cost of traditional manufacturing. 3D printing will revolutionise manufacturing, privacy, costs and timescales of creating a prototype. Applications include Medical Devices, Testing Devices, Training and Visualization aids, Personal Protective Equipment, Personal Accessories, Emergency Dwellings. 3D printing can be used for prototypes, molds and tools and End-Use Parts. Other 3D opportunities include Hobbies, toys and Games Semiconductors and Semiconductor equipment Die Sets, Jigs and Industrial Molds Foundries and Metal Products Footwear Plastic Products Healthcare equipment and supplies Machinery Automobiles and Auto Parts and Equipment Aerospace This is a massive game
Read more

All is flashing in 2023 for a good year

-
Image
All is flashing in 2023 for a good year The  Breakaway Momentum    indicator compares the number of advancing stocks to the number of declining stocks in the market over a 10-day period. And it’s triggered when the amount of advancing stocks outnumbers declining stocks by about 2-to-1. This is very rare and usually only happens when bear markets are ending and bull markets are starting.   The  Whaley Breadth Thrust  indicator is similar. It compares the number of advancing stocks to the number of declining stocks in the market over a five-day period. And it’s triggered when the amount of advancing stocks outnumbers declining stocks by about 3-to-1. This, too, is very rare and usually only happens when bear markets are ending and bull markets are starting.  The    Triple 70 Thrust  indicator was also triggered. This happens when the percentage of rising stocks in the market exceeds 70% for three consecutive days. This is also a rare indicator, and it also tends to mark the start of a ne
Read more