Gold Technical Update: Major Bottom in Gold/S&P 500 Ratio

A fascinating note and chart of the gold/S&P 500 ratio from All Star Charts:


Gold/S&P 500 (Weekly – 6 year chart)


“Gold was in a downtrend vs the S&P500 since the highs in 2011 until February when the ratio broke out above the downtrend line from those 2011 highs. At this point with momentum in a bullish range, we want to be long the Gold/S&P500 spread if we’re above that downtrend line with a target up near 0.95 which is the 38.2% retracement of the entire 2011-2015 decline.”


This looks like one of the most compelling trade setups available to investors right now. In addition, the risk/reward is attractive and more importantly the risk is clearly defined. To put this into perspective for the gold/S&P 500 ratio to rise to .95 will mean that gold is about to rise significantly (~$2000) or the S&P is about to drop precipitously. Or, some combination of the two will occur. I like this trade not only from a technical perspective but it also makes a lot of fundamental sense to me. The fact that it is grounded in a clear long-term chart setup makes it compelling.

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