Gold Outperforming Equities: Further Evidence of a Market Turn
As we have noted frequently in the past, gold's bear and bull cycles closely match the cycles of equity markets, only in reverse. Last week, gold rallied strongly against equities, with the gold/S&P ratio blowing past its previous recent high of last August 24 when equities had a near death experience. Here is the daily chart for the past year.
Gold Outperforming Equities: Further Evidence of a Market Turn
As we have noted frequently in the past, gold's bear and bull cycles closely match the cycles of equity markets, only in reverse. Last week, gold rallied strongly against equities, with the gold/S&P ratio blowing past its previous recent high of last August 24 when equities had a near death experience. Here is the daily chart for the past year.
Looking back 10 years, below is a weekly chart of the same gold/S&P ratio. The top was hit in August, 2011 with gold reaching its all-time high while equities were being punished by debt crises in Europe and America (remember the debt ceiling fiasco?). Last week, this ratio broke forcefully above its 50 week moving average for the first time since that 2011 high, fully 230 weeks ago.
There are two observations to consider. First, what is this chart telling us? Have we entered a new period of financial crisis in which gold outperforms equities? The collapse of bank stocks in recent weeks-a key positive indicator for the gold price-supports this suspicion. Second, as the above chart shows, there is potentially a long way to go to the upside for gold relative to equities.