"Turnaround or growth, it's getting your people focused on the goal that is still the job of leadership." - Anne M. Mulcahy
Gold has massively underperformed the S&P 500 lately, alongside many other metals as investors favor equities over commodities (with Oil being the exception). There are numerous reasons for this. I have noted in prior writings that historically, Gold has underperformed stocks during "risk-on" junctures, and outperformed during deflation pulses, despite arguments that Gold is more of an inflation hedge than not. Since late August, there has been tremendous opportunity cost in holding the yellow metal as forced reflation by SuperBen and the League of Extraordinary Bankers has caused share buybacks and shrinking float relative to invested money.
A bottom may yet be in sight however. Take a look below at the price ratio of the SPDR Gold Trust ETF (GLD) relative to the S&P 500 (SPY). As a reminder, a rising price ratio means the numerator/GLD is outperforming (up more/down less) the denominator/SPY.
I have highlighted important inflection points on a relative basis to show that we may be near an important support level, whereby Gold could begin to lead stocks higher. Under what scenario would this happen? Could this coincide nicely with a potential correction to come in risk assets? Our ATAC models used for managing our mutual fund and separate accounts remain defensive, and are sensing some improvement. However, should severe intermarket deterioration take place, I would not be surprised at all to see Gold catch a strong bid. The trend remains down for now, but may not be that way for long.
Additional disclosure: This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.