Signals – From Gold and the S&P

Thanks to High Frequency Trading and the rise of the machines in the electronic markets, gold and the S&P 500 Index are difficult for non-machines to understand and predict on a short term basis.

What do they tell us in the longer term?

It is an exponentially increasing world!  Both gold and the S&P 500 Index have risen exponentially for fifty years.  Since they often move counter to each other, take the sum of the gold price plus the S&P 500 Index and you can see the overall trend more easily.

M-GC+SP

The exponential trend since 1990 is clear.  We can reasonably expect they will continue to rise until we experience a massive reset in the financial systems.

What about the RATIO of gold to the S&P 500 Index?

M-GC-SP ratio

Since 1990 the ratio (weekly data) has varied widely, from under 0.20 to 1.60.  The two low points in the ratio are marked with green ovals, and the high point in 2011 is marked with a red oval.

Conclusion:  At green ovals buy gold and sell the S&P.  At red ovals sell gold and buy the S&P.

What about actual gold prices?

M-GC

The above gold chart – log scale since 1990 – supports those conclusions.  At green ovals, which are the same ovals as on the ratio chart, buy gold and at red ovals sell gold.

SUMMARY:

 

  • Prices for gold and the S&P 500 rise exponentially. We can thank central banks, runaway debt, continual currency devaluations, and fractional reserve banking, but regardless, expect those exponential increases to continue until the financial system experiences a major reset.
  • The ratio of gold to the S&P 500 Index is currently low, consistent with the fact that gold hit a multi-year low in December 2015. The ratio can easily triple from here.
  • Green ovals indicate long-term opportunities to buy gold and probably to sell the S&P 500 Index.
  • Do your own research, but based on the above charts, 2016 looks like a good time to accumulate more gold for the long term. When the gold to S&P 500 Index ratio approaches 1.2 – 1.6, reconsider both markets.
  • Expect: More currency devaluations, higher prices for commodities, volatile markets, increasing central bank desperation as shown by craziness such as negative interest rates, more QE, and continued zero-interest rate policy.  Central banks do NOT have your back – unless you are a member of the political and financial elite.

Read:

Doug Casey:  Casey on the Greater Depression

Jim Grant:  Central Banks Have Lost Their Marbles

 

Gold thrives, paper dies!

 

Gary Christenson

The Deviant Investor

 

 

 

 

 

3 thoughts on “Signals – From Gold and the S&P

  1. Its a little difficult to interpret your charts. We are expecting a resumption of the long term bull in Gold which will greatly exceed the previous highs. If there is a reset in the currency against gold as a monetary standard then Gold could sky rocket. Your charts show a mixed bag with switching investments between Gold/silver and equities and not a relentless breakout of gold.. Since a reset of global debt is almost inevitable to return to normal economies, Gold will almost need to be the standard we return to to eliminate an unpayable debt. This should be the ultimate gold play for holders of bullion. Tell me how I can t be the ultimate winner as a holder of bullion during the global economic reset?


    • First of all, I agree with you that we should expect a resumption of the long term gold bull market. I also agree that currencies are likely to reset much lower against gold. And I think gold could skyrocket, as you suggested. The problem, from my perspective, is when. My charts show, for the most part, a long term “status quo” of gradual devaluation since I have no way to model unexpected gold spikes higher. They will occur but soon, later in 2017, or 2023?

      But examine the chart from this article and see if it more closely matches your expectations.

      http://deviantinvestor.com/7709/keep-the-money-game-churning/

      The Deviant Investor


      • Thanks Sir. But it looks like we will have to be as patient with the Gold breakout as we were with the Bear decline. I was hoping it wouldn’t take until the 2020s to achieve a gold Bull peak. Us smaller to medium investors don’t have the liquidity of the large investors and cant react quickly to the market. I have committed myself to precious metals because of all the things that are going wrong in the World economy and that the Central Bank tricksters have no more tricks up their sleeves to defer the final consequences. I cant easily split my investments from precious metals to equities for short to medium term reversals. especially since there is likely a pending shortage in Gold/Silver bullion due to pull backs in mine production and increased demand. I just have to ride this out.


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