We got November inflation data this morning.
The fall in the headline number from 3% to 2.7% (year-over-year) from the prior period was a big positive surprise.
And this cooler inflation report followed the soft November jobs report, from Tuesday. That said, there were data points missing due to the government shutdown.
But these data points, for markets, had already been digested — last week. Remember, Jerome Powell told us a week ago that the labor market was softer than had been reported, and that inflation was in the “low 2s,” once the one-time effects from tariffs were stripped out.
Moreover, the Fed already reacted (another cut, and a return to expanding the balance sheet). So, the data points this week were less important.
Let’s talk about gold and silver.
If you recall, we looked at this chart of the gold/silver ratio a few months ago …
Remember, when this ratio is around these extreme levels, it has historically been associated with extreme moments of safe-haven demand.
And in the past cases, the gold safe-haven demand leads … pushing the ratio to extremes.
Silver later follows (higher) on both industrial demand (in war time) and relative value (as a safe haven asset).
And in these prior peaks, it’s the outsized rise in silver that pushes the ratio back down.
That’s exactly how it has played out. Silver has outpaced gold about 3 to 1 since we looked at this in September.
More broadly, the metals complex continues to lead global asset class performance for the year. Silver is now up 110% year-to-date. Platinum is up 103%. Palladium is up 84%. And gold is up 55%.
As we discussed, this is wartime behavior for the metals, as depicted in the gold/silver ratio chart.
With that, the Russia/Ukraine war continues to teeter on the edge of peace and World War 3. The metals are telling the story. And the outcome of the EU Summit, currently underway, may be the lynchpin.
The early indications are not a worse case scenario, which would be an agreement to monetize frozen Russian assets to fund Ukraine war efforts (i.e. the war continues, and likely pulls Europe more explicitly into the war). But not a best case scenario either, an effort to find agreement on the Trump peace plan/end the war (unsurprisingly, doesn’t seem to be among the debated).
Thus, the metals performance is well intact.
