October 8, 2025

(THE ROTATION GAME)

October 8, 2025

Hello everyone

MONEY ROTATES FROM ONE SECTOR TO ANOTHER

If you can understand the simple notion that money never leaves the market, but simply rotates into another undervalued sector, then you will be able to enjoy a never-ending stream of returns.

I’m going to explain this to you by showing you several charts.

By looking at the following charts, you can see a correlation between precious metals and equities.

When equities are strong, gold and other precious metals are traditionally cheap. You can see on the chart below that when equities were expensive, as in the 1960’s and the Dot-com bubble era, precious metals were cheap. When gold peaked in 1980, equities were cheap. Again, when gold spiked in 2010, equities were relatively inexpensive. So, there is always an undervalued sector where funds are flowing to if you consider the correlation between sectors. Hence, money is always circulating.

This GOLD/SPX chart is a 3-monthly chart, so each candle represents 3 months. The chart highlights the gold spikes of 1929/1930, 1980, and 2010. You can see where we are now, just showing a breakout above the 50MA.

SHILLER PE RATIO

The Shiller PE Ratio also gives us a good indication of where equities are cheap and expensive, and this can guide our decisions around market rotation.

WE ARE ROTATING TOWARDS COPPER

Freeport McMoran (FCX) and Broken Hill Proprietary Ltd (BHP) are two stocks to have in your portfolio now.

Money has been rotating into precious metals (gold and silver). Now we will see a move into industrial metals, which means copper.

Monthly Copper chart

The market always moves in cycles – one sector leads, then another follows.

Now, we can see that copper is setting up for a rally.

Around 45% of BHP’s revenue comes from copper, and copper is preparing for a major move.

In 2000, BHP broke out of a long consolidation pattern and rallied strongly. Then it settled into another quiet consolidation pattern for many years. As you can see on the chart here, price action has broken through the 2009-2012 resistance zone and has come back to test that zone. We can see that price action respected the zone and bounced off strongly.

(BHP) 3-month chart at $41.89 (Oct.8, 2025)

Now, if you overlay a Fib retracement over the top of the chart, you can see a three-month ‘hammer candle’ closed just above the .382 Fib – and the tail of the hammer did not quite extend to touch the 50 Fib- and was followed by a bullish green candle. So, the confluence of price action patterns with the Fib 382 confirms the potential reversal point.

This will be a long-term investment; one you keep scaling into on regular occasions. Your future self will thank you.

THE LONG GAME WITH GOLD

As I’m typing this, gold has surpassed $4000 and is now heading towards $4020. Most investors would think that $4000 would be a huge psychological level and would take some time to break through that level.

There are reasons gold will go a lot higher.

Apart from geopolitical conflict, economic uncertainty, and trade tensions, there is also the heavy burden of debt.

Ainslie Bullion suggests that when viewed through the lens of macro technical analysis, gold appears to be following a hyperwave formation. It is currently sitting within Phase 3.

Look at the weekly gold chart here. It shows Phase ,1 which spans from 1982 to 2006.

Ainslie points out that during phase 3 (which is basically vertical) and even into phase 4, extreme price action targets are plausible.

Significant currency debasement has accelerated since 2020. We can see that this debasement has tracked closely with the exponential growth of US government debt.

We know that US government debt now exceeds $37 trillion, and this is projected to keep rising exponentially. So, further debasement of the US dollar seems inevitable to maintain debt servicing.

Ainslie Bullion points to a medium-term gold price target of US$4,500/oz (around AU$6,800/oz. Interestingly, they also suggest that if you extend the current debt trajectory out 15 years, we could see a gold price of US$25,000/oz – or AU$37,000/oz.

It seems gold and US government debt are locked together: as debt levels rise, so too does the gold price.

The significance of the inverse correlation between US dollar strength and government debt needs to be highlighted here.

The more debt there is to service, the more dollars are required. This weighs on the currency.

Since gold is priced globally in US dollars, its price naturally rises as the dollar weakens.

There has been a lot of noise from the central banks/governments about fighting inflation, but they are not too concerned. After all, inflation is basically eroding the real value of their debts. Ainslie captures the whole environment well – by terming it a “silent and regressive tax.”

Keep hedging the system with gold. And don’t forget about silver.

QI CORNER

Charles-Henry Monchau (CIO at Syz Group)