To The Moon

A deep dive into how global liquidity, currency dynamics, and cycle theory combine to create decade-long trends

For those who understood cycle analysis and the confluence of factors discussed in this framework, the gold breakout in February 2024 would have been clearly anticipated. The alignment of liquidity expansion, dollar weakness, and cyclical positioning all pointed to a major move in precious metals. That breakout, which many missed or dismissed as temporary, exemplified how understanding these deeper market dynamics can position investors ahead of significant trends. This analysis explores the framework for identifying and understanding these supercycles, particularly in precious metals and the broader mining sector, and what current market conditions suggest about the potential for a new cycle beginning.

1. The Macro Foundation: Liquidity and Currency Dynamics

Understanding commodity movements requires looking beyond simple supply and demand.

Global liquidity flows, particularly from major central banks, play a crucial role in commodity price dynamics. When central banks inject liquidity into the financial system, this money often finds its way into hard assets as investors seek protection from currency debasement.

The relationship between liquidity and commodities follows a predictable pattern:

Central Bank Liquidity Expansion: When major central banks, particularly those in China and other emerging markets, increase liquidity through various monetary tools, it typically precedes

strength in commodity markets by several months.

Currency Weakness Correlation: Commodity breakouts rarely occur in isolation. They require confirmation from currency markets, particularly weakness in reserve currencies like the US

dollar. This inverse relationship exists because commodities are priced in dollars globally—when the dollar weakens, commodities become cheaper for holders of other currencies, increasing demand.

This intermarket approach ensures that commodity moves aren't viewed in isolation but as part of broader macro themes. Understanding these relationships helps distinguish between temporary price spikes and the beginning of sustained trends.

2. $SPDR Gold Shares(GLD)$ : The Monetary Metal's Role in Cycles

Gold serves as the cornerstone of commodity cycle analysis due to its unique position as both a commodity and a monetary asset. Its movements often telegraph broader shifts in market

psychology and monetary conditions.

The framework for understanding gold cycles involves multiple analytical layers:

Cyclical Timing Within Debt Cycles: Gold typically performs best during specific phases of the 17-21 year debt cycle, particularly during periods of monetary expansion and currency debasement. These cycles aren't random but follow predictable patterns based on credit expansion and contraction.

Institutional Behavior Patterns: Large institutions often create specific patterns in gold markets, establishing "defended zones" where significant orders accumulate. Understanding these zones helps identify where false breakouts might occur and where genuine trend changes begin.

The Psychology of Round Numbers: Major psychological levels in gold serve as magnets for price action. These levels often represent multi-year or even multi-decade resistance points where significant market psychology shifts occur.For those seeking exposure to gold's potential, ETFs like $SPDR Gold Shares(GLD)$ and $iShares Gold Trust(IAU)$ provide liquid, accessible vehicles. These instruments track physical gold prices closely while avoiding the complexities of storage and insurance that come with physical ownership.

3. $iShares Silver Trust(SLV)$ : The Volatile Indicator

Silver's unique position as both a monetary and industrial metal makes it particularly interesting for cycle analysis. Its higher volatility compared to gold provides important signals about market

sentiment and risk appetite.

The silver/gold ratio serves as a crucial sentiment indicator. When silver strengthens against gold, it typically indicates investors are embracing risk and expecting economic expansion.

Conversely, when gold outperforms silver, it suggests defensive positioning and economic concerns.

Weekly Timeframe Significance: Filtering silver's notorious volatility through weekly timeframes provides stronger confirmation signals. Weekly closes above multi-year resistance levels often signal the beginning of new trend phases that can last months or even years.

Industrial Demand Dynamics: Unlike gold, silver has significant industrial applications, particularly in solar panels and electronics. This dual nature means silver responds to both monetary conditions and industrial demand cycles, creating unique opportunities when both factors align.

The $iShares Silver Trust(SLV)$ offers direct exposure to silver prices, though investors should understand that silver's higher volatility means both larger potential gains and increased

risk. During commodity cycle upturns, silver often outperforms gold by multiples, making it attractive for those who can tolerate the volatility.

4. The Mining Complex: Leverage to Metal Prices

Mining stocks provide leveraged exposure to commodity prices but with additional complexities.

Understanding the relationship between miners and their underlying commodities reveals important market dynamics.

The Miners-to-Metal Ratio: When mining stocks lag their underlying metals, it often indicates skepticism about the sustainability of metal price moves. Conversely, when miners lead, it

suggests confidence in continued strength. This relationship serves as an early warning system for commodity cycle changes.

5. Rare Earth Elements: The Technology Connection

The rare earth sector represents a fascinating intersection of commodity cycles and technological innovation. These elements, crucial for everything from smartphones to electric

vehicles, follow different dynamics than traditional commodities.

The AI and Technology Driver: The transition to AI and advanced technologies requires massive amounts of rare earth elements for semiconductors, batteries, and other components. This structural demand shift could drive a multi-year cycle independent of traditional economic cycles.

Supply Chain Concentration: With production concentrated in specific geographic regions, rare earth markets are particularly susceptible to supply disruptions and geopolitical tensions.

This concentration creates the potential for dramatic price moves when supply chains face stress.

$VanEck Rare Earth and Strategic Metals ETF(REMX)$ provides exposure to this theme, offering a basket of companies involved in producing, refining, and recycling rare earth and strategic metals. Given the concentrated nature of this market and its connection to major technological trends, REMX could see particularly strong performance during a commodity supercycle.

6. Building a Strategic Position

Understanding cycles provides the framework, but practical implementation requires a thoughtful approach. Here's a strategic framework for positioning in commodity ETFs:

Core Holdings Approach: Consider establishing core positions in broad commodity exposure through ETFs during cyclical lows. The key is recognizing that cycles move slowly—what seems

like a buying opportunity often lasts months or even years.

7.Conclusion: Positioning for the Next Cycle

Commodity supercycles reward patient capital and punish short-term thinking. The current confluence of factors—monetary expansion, technological shifts, and supply, constraints—creates conditions reminiscent of previous cycle beginnings.

For those seeking to position for this potential cycle, ETFs provide accessible vehicles for implementation. Starting with core positions in $SPDR Gold Shares(GLD)$ and $iShares Silver Trust(SLV)$ , then potentially expanding to mining exposure through $VanEck Gold Miners ETF(GDX)$ and $VanEck Junior Gold Miners ETF(GDXJ)$ , and considering specialized plays like $VanEck Rare Earth and Strategic Metals ETF(REMX)$ for rare earth exposure, creates a diversified approach to the theme.

Remember that pullbacks in early cycle stages often provide the best risk/reward opportunities.

When commodity ETFs pull back sharply during a developing supercycle, they often rebound with even greater force as the cycle reasserts itself. The key is having the conviction based on

cycle analysis to view these pullbacks as opportunities rather than threats.

For those interested in implementing these concepts, remember that commodity investing requires patience and strong risk management. Consider starting with small positions, scaling during weakness, and maintaining a time horizon measured in years rather than months. The next commodity supercycle, if it unfolds as analysis suggests, will reward those who position

early and maintain discipline through the inevitable volatility.