This is the chart of SPX/GOLD, and you can see there are times when SPX outperforms GOLD, like the era that began from September 2011 until now, and there are times when GOLD outperforms SPX, like from the beginning of September 2000 until September 2011.
In the time that SPX outperforms, we know that there are usually lower interest rates, higher economic growth, and, as a result, we are in a growth cycle. However, when GOLD starts to outperform, that's a time when there are higher risks in the economic world with lower optimism about future economic conditions.
In these kinds of times, which sometimes also align with recessions, we can see investors are more keen on having gold in their assets as a safe haven to protect themselves against risks in the financial world.
Now, if we look at the chart, we see that the price is actually very close to a resistance which could eventually cause this ratio to turn toward lower prices, resulting in an era with higher GOLD prices and lower economic growth.
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Since the idea was posted about the possible outcome of reaching this ratio to the very important resistance level and the potential shift in the financial world, we have witnessed a severe and impulsive bullish move in Gold. Additionally, the S&P broke below the rising wedge pattern, indicating what could happen if this ratio indeed starts moving lower.
Nice post! Did you notice that prior to major shifts in the trend (such as 1999/2000 and 2009-2011), there were two different points in time where the SPX/GOLD ratio touched the trend line boundary (the first touch representing a "warning shot") before the long term trend shift began? Even more interesting is that we just had a second touch on the upper trend line during February after the first touch took place in January 2022.
mohemati
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@BlkGold acfually I did notice this. However, I'm very thankfull that you mentioned this again. personally I'm very fasinated about this chart and everytime I look at it I find something amazing about it. Thanks for your cm.
LegionQ8
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Maybe now price will start to correction
mohemati
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@LegionQ8, I'm agree with you, If Gold continue its bearish corrective move then yes there is a high chance that this ratio start a bullish corrective unless SPX also start a bearish corrective move. In this case if stock indices weaken more than gold then still we could see this ratio to move lower.