Macro and Global Liquidity Analysis: Gold, Silver, and Bitcoin - March 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 Tuesday. 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 switched back into the Mid Cycle phase of the Global Macro Cycle on the back of continued strength in the global economy this month. We are still well below the halfway line however, indicating there is plenty of runway left for the upward momentum to continue.

This is consistent with what we are seeing in terms of economic growth in the U.S., as evidenced by the ISM. Although the leading indicator is looking choppy in the short term for April…

the trend over the next 3 months indicates we have passed the bottom of the cycle and expect to be heading higher.

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 sitting around 2%, which is within the Federal Reserve’s stated target range, so it would be supportive of a new rate cutting cycle as hinted at by the Fed recently.

U.S. government debt continues its relentless, and increasingly exponential, march higher with further unfunded government spending announced this month that will see even greater new highs in the months ahead.

Bond yields remain stable for now, but concern is rising that volatility will return as the government attempts to issue more supply onto a market that is not interested in the increasing levels of risk that supposedly “risk free” assets are starting to represent. We will continue to watch the yields very closely. We will get a big warning sign if they don’t fall alongside the official Fed Funds Rate as you would usually expect (indicating the bond market is “broken”).

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.

Global Liquidity is currently recovering from the cycle lows as more countries return to expanding liquidity (green) vs contracting (red).

Looking at a weekly level, Global Liquidity just hit a new record high of US$171.12 trillion.

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 most recent Gold price cycle low was in September 2022 and the price appears to be rising consistently with an improving Global Liquidity picture ever since. The recent continued strength and new all-time highs against a cooling short term Global Liquidity backdrop is especially bullish.

It is a similar story with Silver price which also had a cycle low in September 2022 and is holding on nicely to recent gains.

It remains prudent to keep an eye on the Gold Silver Ratio (GSR), as when the ratio falls it can happen very suddenly, and the move in Silver prices can be explosive. The GSR is currently very high by longer term historical standards and trending upwards, so the potential for another Silver “slingshot” move higher, as the GSR mean reverts, continues to increase.

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 price 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 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 249.1% p.a. as at Tuesday’s recording.

Watch the full presentation with detailed explanations and discussion on our YouTube Channel here: https://youtu.be/xFrghQ7P7LY

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!