The 3 Snowmen & The Precious Metals

The 3 Snowmen

Long-term subscribers may remember the 3 Snowmen. The HUI measured target of 888 I had back in the 2010 time frame. It was a simple measurement of the crash and recovery pattern of 2008-2010. As a TA, that is often what I do; measure things.

Well, in a fine lesson about being open-minded, Bernanke’s cyclical inflationary emergency operations altered the macro and croaked my target for the counter-cyclical gold sector. Mr. Fat Head (H&S) formed and that was that. The dawn of a terrible bear market, 888 just fantasy unfulfilled.

That was an important lesson I heeded and took personally. It’s why I critiqued gold bug promotional interests over the subsequent years. Bernanke and his successors had figured out how to create cyclical inflation to temporarily benefit the economy. That was detrimental to gold stocks due to both inflation and its positive economic cyclicality.

That is all over now. It ended chart-wise, in 2022 (ref. Continuum chart below).

I did not even realize the Snowmen were at hand until a subscriber pinged me about it. Of course, the rationale for the 888 measurement expired in 2012 when Huey topped. What is happening now, including the registering of that target, is one of two things:

1. The final drive of the bull market that began in 2016, with a bear market to follow, or…
2. The first impulse into the new macro (and its new rules) that sees gold only just getting started in relation to traditional paper assets, and hence, a long-term bullish picture ahead.

I’ll take 2, first impulse in the new macro, Alex. But the first correction could feel like a cyclical bear market in its intensity.

More on the Precious Metals

Silver round number: 100

Gold round number: 5000

Wow, who would have thought? Well, most gold bugs, including myself. But then came all those dreary years of learning lessons like the failed HUI 888 target above and even more importantly, lessons about why it failed (due to the mechanics of the brilliantly evil Bernanke era’s new and innovative ways of inflating the system to positive economic appearances).

Today, our “new macro, new rules” theme is being proven. The macro changed in 2022, when the Treasury bond market rebelled and destroyed the secular downtrend in long-term yields.

Our view right from the get-go was that while I could not yet define many of the coming effects, one effect of this change was going to be policymakers’ (Fed & Government) relatively impaired ability to create (monetary, print) and disperse (fiscal, spend) new funny munny into the economy in any sort of effective way.

Do you think the gold and silver markets now see this? Yes, me too.

When a correction finally halts this hysterical move in silver and much of the precious metals and commodity complexes eventually follow into correction, we’ll have our first test within the new macro. However, here we should refer back to the big picture Gold/SPX and Silver/SPX charts above [not included in these excerpted segments] and keep in mind that what is going on now is a catch-up slingshot move, now that the spell of the old macro has been broken.

Spell? Yes, the spell that many were put under within the illusion that Bernanke and his offspring could remotely and successfully manage a financial system over the long-term to little obvious ill-effect. That both sides of the political aisle could forever spend that newly printed money into their favored areas.

That Ponzi racket ended with the virulent inflation problem manufactured by the Fed in Q1, 2020 and spent into the economy, first under the Trump administration and then under the Biden administration. Today, Trump 2 seeks a subservient Fed chief who will drop rates, try to keep the system liquefied and create more munny to be spent on favored areas.

Why again did the Continuum chart above rebel? Well, once again Debt-to-GDP handily answers the question. The paper/digital money scam has run its course. It’s just that a majority still don’t know it. The Continuum above knew it in 2022, and those of us studying the markets closely soon caught on as well.

St. Louis Fed (my markups)

Debt fuels this economy. Period. As you probably know, GDP is in a long-term uptrend. “America great again” (and has been for many years)!! No. America has been able to leverage its debt (currently an untenable $37+ Trillion and ticking upward) to keep the Ponzi-conomy going. Some will accuse me of a case of TDS (and they have), but Dear Leader demands easier money, a more dovish Fed, more debt, and unwittingly, more inflation.

St. Louis Fed

In the new macro, and considering gold has barely gotten going in relation to the bloated stock market, the precious metals are pulling out the Trump card, so to speak. In 2025-2026 we are being shown the puzzle pieces that were missing from the picture when the Continuum first rebelled in 2022.

Though much of the developed world is in a similar boat, I am a US citizen and so I focus on the US. A late great power that is driving itself berserk after a decades-long ‘debt for growth’ orgy.

I think the US will come back from this, both to its senses and to a sounder financial system. Gold will be at the center of this. The stock market will not. It was the beneficiary of the old macro. Unfortunately, a vast majority is operating as if we are still in Kansas (AKA the old macro). We’re not there anymore.

Indeed, if a rebound in stocks vs. gold doesn’t happen soon (again, it’s FOMC week), the SPX/Gold ratio will make its first monthly close below a key level. Either way, interim relative stock rally or continued decline, the era of stock market preeminence has been over since 2022 and into the foreseeable future.

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