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The thing is that the ratio soared this year, but other than that, it’s been rather stable since 2018.
Translation: except for this year, gold was moving higher just like U.S. stocks – not thing more.
Given how profound gold’s rally seems on its own, the above might seem like a bucket of cold water. Yes, gold moved higher, but it didn’t outperform stocks despite this year’s gains. And those gains are now being erased.
What’s even more interesting, is that those short-term upswings in the gold:S&P ratio usually (in all three cases from the previous years except for the 2020 year, which is comparable to any other year) meant major tops – also for gold stocks which you can see in the background of the chart.
The RSI indicator does a good job of showing when the rallies were excessive – those are the times when it moved well above 70. That happened at the 2006 top, 2008 top and the 2011 top.
As you know, we already have plenty of analogies between 2008, 2011, and today, and the above strengthens them even further.
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