Gold Approaches A Long-Term Buy Signal For Short-Term Crosscurrents
Jesse Felder | Sep 19, 2019 12:15AM ET
Over the past few months, gold has been on a tear. The combination of weakening stock prices and strengthening gold prices could soon trigger a long-term buy signal for the latter and sell signal for the former.
The chart below plots the 3-year rate-of-change of the gold-to-S&P 500 ratio. When this number is positive it is a pretty good sign that it is time to own gold in favor of stocks and when it is negative, vice versa.
There is a very good chance this indicator will turn positive over the next few months, even if gold continues to correct in the short run, triggering the first long-term buy signal since 2001. And if past bull markets in the gold price are prelude to a new one, then the recent gains are only a hint of what is yet to come.
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