Wednesday Report…SPX and GOLD Combo Chart : The Best of Both Worlds

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There is a misconception out there that in order for gold to have a bull market the stock markets have to crash and burn. Gold investor literally pray for the stock markets to crash so they can get their bull market in the PM complex. Once an idea like that gets embedded into the minds of gold investors it becomes hard for them to see the truth. A simple combo chart can show you the truth about why the stock markets don’t have to crash in order for gold to enjoy a bull market.

Below is a 20 year monthly combo line chart which has the SPX on top and gold on the bottom. The green shaded areas show when the SPX and GOLD both rallied at the same time. I used the rally phases in the SPX to draw in the green shaded areas to see what gold looked like.

Starting at the end of the secular bull market in 2000 for the SPX gold basically traded sideways to slightly up during the SPX’s bear market into its 2002 bear market low. From 2002 until the SPX topped out in its bull market run into the 2007 top , gold rallied right along side of the SPX. How can that be? Gold isn’t supposed to have a bull market when the SPX is having one.

The SPX did top out slightly ahead of gold and had a much bigger correction than gold into 2009 crash low, but they both declined without gold producing a new bull market relative to the SPX. You can also see gold actually bottomed just ahead of SPX in late 2008 , while the SPX bottomed out in March of 2009. For the next two years the SPX and GOLD both enjoyed a strong bull market move into the 2011 high.

Again gold topped out just after the SPX in 2011, but this time gold began its cyclical bear market while the SPX continued higher with its bull market. Gold finally bottomed in December of 2015 and from that point both the SPX and GOLD have been rising together. How long will they move up together is anybodies guess, but this combo chart suggests that we don’t have to see the stock markets crash in order for gold to have a bull market. Maybe we’ll see the best of both worlds which would be good for everyone. All the best…Rambus