Saturday , 3 December 2016


Current Gold-to-S&P 500 Ratio Suggests Major Upward Move Coming In Gold Price

The 25 year graph of the ratio of gold to S&P 500 Index reveals that gold is currently very low compared to the S&P 500. Further analysis in this article suggests that by 2025 gold should be in the $3,000 to $4,500 range and the S&P 500 somewhere between 1,500 and 3,000.

The edited excerpts above and below (by Lorimer Wilson of munKNEE.com Your Key to Making Money) are taken from an article* by Gary Christenson (DeviantInvestor.com) originally entitled Gold Up & S&P Down? which can be read in its entirety HERE.

Gold has been weak for over 3 years while the S&P 500 has been strong and this has put the ratio of gold to the S&P 500 at a 7.5 year low.

R-Gold_SP Ratio

The above begs the question: Is the S&P 500 high, is gold low, or both?  Consider the log-scale chart below of the S&P 500 and the 65 week moving average.

R-SPX

[From the above I conclude that:]
  • gold looks oversold and
  • the S&P 500 looks too high and dangerously over-extended.
    • A correction substantially below 2,080 would break the uptrend line and
    • a break below 2015 would break the 65-week moving average which is currently approx. 100 points above said average.

Conclusion

My belief is that central banks, which clearly want inflation and fear deflation, will find a way to create the inflation they want.  As such, I expect “more of the same” or much higher inflation, perhaps hyperinflation, in our debt based, unbacked, fiat, easily printed, “inflate or die,” Quantitative Easing, digital and paper, divorced from reality, currency world and gold prices somewhere between $3,000 and $4,500 by 2025 as a result.

Closing Thoughts:

Ayn Rand once said:

“We can ignore reality, but we can’t ignore the consequences of ignoring reality.”

[To put the above into context in today’s world I believe it would be appropriate to say:]

“We can ignore the lessons of history that show that unbacked fiat currencies always die, but we can not ignore the consequences of ignoring history:

  • the devaluing of currencies
  • hyperinflationary destruction of wealth
  • destruction of the middle class,
  • destruction of the bond market,
  • destruction of the supposed wealth represented by debt-based paper IOU’s and
  • the transfer of wealth to the banks and countries that hold [a preponderance of] physical gold.”

*http://deviantinvestor.com/7178/gold-up-sp-down/

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