Macro and Global Liquidity Analysis: Gold, Silver, and Bitcoin - June 2024

Today the Ainslie Research team brings you the latest monthly update on where we are in the Global Macro Cycle, driven by the Global Liquidity Cycle, and the implications for Gold, Silver, and Bitcoin. This summary highlights the key charts that were discussed with our expert panel on Monday. We encourage you to watch the recorded video of the presentation in full for the detailed explanations.

 

Where are we currently in the Global Macro Cycle?

We remain in the Mid Cycle phase of the Global Macro Cycle. We continue to experience choppy data from the global economy, with no clear break higher so far. The stable position below the halfway line indicates there is still plenty of runway for upward momentum in the months ahead as the cycle responds to the additional liquidity and stimulus expected in the 2^nd half of 2024.

 

This is consistent with what we are seeing in terms of economic growth in the U.S., as evidenced by the mixed ISM data. We remain below the 50 line for June in terms of manufacturing data, however services are comfortably above…

 

and the forward-looking indicator over the next 3 months continues to sit right on the 50 line. This is not necessarily a bad thing for risk assets however, as the longer we see sideways action, the more room it gives to central banks to ease policies and stimulate further growth ahead.

 

In terms of U.S. inflation, our leading indicator shows that the lagging government reported rate continues to remain higher than the real-time data, so there is no strong upward pressure on the rate expected over the next few months. The leading indicator suggests that the real rate of inflation is just slightly ticking up from around the 2% level, which is the Federal Reserve’s stated target. We wonder if 3% will increasingly become considered as acceptable?

 

U.S. government debt continues its relentless, and increasingly exponential, march higher with no meaningful attempts to bring it under control.

 

Bond yields remain somewhat stable and range bound as we wait to see how they respond to greater issuance later in the year. We continue to wait and see if there is an acceleration of yields higher as a major warning sign that we are heading into a situation where the Fed or the government will be forced to respond.

 

Where are we currently in the Global Liquidity Cycle?

Global Liquidity leads the movement of World financial assets, so this is the indicator we look most closely at to determine where the opportunities are to take advantage of. It is currently recovering from the cycle lows. You can clearly see the shift from the red patch where liquidity was being drained on average from global markets in 2022 and 2023 to greens and lighter neutral yellows starting to dominate as the liquidity picture improves.

 

Looking at a weekly level, Global Liquidity has been chopping sideways in recent weeks, consistent with the other indicators discussed, as we wait for the next catalyst that will likely push it higher.

 

Putting it all together, we can see that the current cycle has been slower to pick up than other recent cycles, but overall is still on track to play catch-up soon when comparing to the historical patterns.

 

 

Macro Assets for Macro Cycles

Understanding Consumer Price Inflation (CPI) is far less important than Asset Price Inflation in ensuring wealth isn’t eroded, and can actually grow, over the long term. A combination of Gold, Silver, and Bitcoin keep up with the growth in Global Liquidity over time, and the corresponding debasement of fiat currencies. As such we look to trade into each at the appropriate times to take optimum advantage of the cycles. When correctly timing and structuring the rotation, it is possible to significantly outperform ongoing monetary debasement.

 

The Gold cycle low was in September 2022 and the price has been rising consistently with an improving Global Liquidity picture ever since. The recent continued strength and new all-time highs have been especially bullish, pushing even higher on the back of the recent geopolitical uncertainty and front running the expected liquidity to come.

 

It is a similar story with Silver which also had a cycle low in September 2022 and has exploded higher with recent gains.

 

It remains prudent to key an eye on the Gold Silver Ratio (GSR), as when the ratio falls it can happen very suddenly, as we have had a glimpse of recently with Silver.

 

Bitcoin is the most directly correlated asset to Global Liquidity. Trading Bitcoin can be thought of as trading the Global Liquidity Cycle, but with an adoption curve that leads to significantly higher highs and lows each cycle.

 

The Bitcoin cycle low was in November 2022, and since then the returns have been unmatched by any other major asset. Recently breaking through all-time highs and for the most part maintaining those gains with historically smaller than average drawdowns along the way suggests that the Bitcoin market is looking through the short-term Global Liquidity volatility noise to the much higher levels on the horizon.

 

A Simple Trading Plan to take advantage of the cycles

Watch the video presentation to see full details of the specific Trading Plan we provide, that you can follow, which has returned 184.1% p.a. as at Monday’s recording.

 

Watch the full presentation with detailed explanations and discussion on our YouTube Channel here: https://www.youtube.com/watch?v=oC7xtvm-xH4

Until next month when we return to reassess and identify what has changed, good luck in the market!

 

Chris Tipper
Chief Economist and Strategist
The Ainslie Group

x.com/TipperAnalytics

 

Note: The monthly video presentation is recorded live with our expert panel. Our objective is to make the updates as useful and specific to what you want to understand as possible, so as always feel free to reach out with any questions or feedback that we can incorporate into next month’s video to make it something that provides you with the highest possible value for your time!