Gold and silver stocks soared across the board yesterday as gold rallied up to $1900. Gold appears to be in the process of breaking out now through its long-term $1880-$1900 resistance zone, which we have been talking about for a few weeks now, but many mining stocks already did it. Take a look for instance at Barrick Gold.
And look at NEM, which was the top gainer inside the S&P 500 on Thursday.
I own both of these stocks, but instead of going through a long discussion on all of this I just want to point out ONE simple chart for you that has the most important implications of any of them. That is the GLD/SPY ratio – that’s the relative strength ratio that compares the price action of gold with that of the S&P 500.
I talked about watching this ratio in my latest video update and this ratio broke out yesterday through its most recent high.
This ratio means that a new trend of gold outperforming the stock market has begun.
Momentum money from hedge funds goes into what beats the market.
Gold is doing that (and silver) so look for money flows to continue into gold going forward now.
The stock market turned down yesterday and the recent bounce appears to have stalled out at the 200-day moving average for the S&P 500.
The Nasdaq is trading weaker than the S&P 500 and the ARKK ETF is doing even worse, with the latter already deep in a bear market.
Gold and silver outperforming the market while the market is going down and interest rates are going up will make precious metals a necessary trade for professional money managers.
The small trader will get in later, once they give up on their fad ARKK style plays and see gold, silver, and mining stocks go up long enough that they then feel a need to chase.
That’s months away from now, maybe even a year.
The pros are going to get into gold and mining stocks on the first breakout rally, but the masses won’t get in to much later, probably after prices double from here first. Right now they are still trying to pick bottoms or play short-term rallies in past fad winners and gamble on crypto coins. That’s fine. That just means buying now is still relatively buying early.
Again, the fact that gold is outperforming all of these things so far this year and the GLD/SPY ratio broke out is the thing worth pondering over today and this long holiday weekend for the markets, which will be closed on Monday in the United States for President’s Day.
-Mike
