Here is a four-panel chart showing the recent strength of gold and its outperformance versus the other main asset classes.
Here’s the chart:
Let's break down what the chart shows:
The yellow line is the Gold ETF index price.
The blue line is Gold relative to Bonds.
The gray line is Gold relative to Stocks.
The black line is Gold relative to Commodities.
The Takeaway: If you didn't know already, we’re in the midst of a massive gold rush.
Gold has been an outstanding place for your money since breaking out of its multi-year base in early 2024.
The new absolute and relative highs we’re seeing are signals of strength, not weakness.
When the lines go from the lower left to the upper right, we call those uptrends.
Right now, gold is at fresh all-time highs on an absolute basis, and it’s showing remarkable strength with 4-year highs relative to US stocks. Additionally, gold is achieving new all-time highs relative to bonds, and it’s also making 4...
My Risk-On/Risk-Off ratio has reached a 22-month low, dropping below a key level that acted as resistance in 2021/22, which transformed into support from 2023 to the present.
Here’s the chart:
Let's break down what the chart shows:
The black line is my Risk-On/Risk-Off ratio.
The Risk-On components consist of Copper (HG1), High Yield Bonds (JNK), Aussie Dollar (AUDUSD), Semiconductors (SOXX/SPY) & High Beta (SPHB/SPY).
The Risk-Off components consist of Gold (GC1), US Treasury Bonds (TLT), Yen (JPYUSD), Utilities (XLU/SPY) & Staples (XLP/SPY).
If this ratio rises, the numerator (risk-on) is outperforming the denominator (risk-off); if it is falling, the denominator (risk-off) is outperforming the numerator (risk-on).
The Takeaway: The message right now continues to be… we are in a Risk-Off environment.
This looks to be a pivotal moment for the US stock market. With this key level now broken, it reinforces the weak market conditions I’ve been...
Three of my key Risk-On/Risk-Off ratios are reaching new lows.
Here’s the chart:
Let's break down what the chart shows:
The blue line in the top panel illustrates the relative ratio of High Beta vs. Low Volatility. In the middle panel, the gray line represents the relative ratio of High Yield Bonds vs. Treasury Bonds. Lastly, the black line in the bottom panel depicts the relative ratio of Equal Weight Consumer Discretionary vs. Equal Weight Consumer Staples.
If these ratios rise, the numerator (risk-on) is outperforming the denominator (risk-off); if they are falling, the denominator(risk-off) is outperforming the numerator (risk-on).
The Takeaway: These three ratios are my go-to favorite Risk-On/Risk-Off barometers: High Beta vs. Low Volatility, High Yield Bonds vs. Treasury Bonds, and Equal Weight Consumer Discretionary vs. Equal Weight Consumer Staples.
In healthy bull markets, these ratios move up and to the right on the chart.
