Gold miners take off while financials sink

  • Jason Goepfert

    Jason Goepfert

    Published: 2020-05-07 at 11:00:00 CDT

Lately, gold has been holding up and gold mining stocks have been rocketing higher. At the same time, financials have been barely holding water. Relative to the S&P 500 index, the NYSE Arca Gold Miners index has made consistent new highs, while the S&P 500 Financials index has been mired near its lows.

Gold miner to S&P 500 ratio and financials to S&P

This does not seem like an auspicious setup for the broader market. Bets on gold mining stocks are commonly taken as a bet on general chaos, while bets on financials are a bet on economic growth and stability. The fact that the former is at a new and the latter is at a low seems troubling.

Like a lot of things market-related that sound good in theory, there is maybe a shred of truth in it but overall it's not a consistent factor. When the ratio of gold miners to the S&P was within 0.5% of a 52-week high and financials to the S&P within 0.5% of a 52-week low, it was a major warning in late 2007 - early 2008, but after that, not so much.

Gold miner to S&P 500 ratio hits high financials a low

Financials fared worse than the overall market, and gold miners worse still, at least longer-term, since most of the signals triggered in the past decade.

When we go back further using a specific gold mining stock, the same general pattern held true.

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We also looked at:

  • What happens after other front-loaded (versus back-loaded) 30-day rallies from a low
  • The Nasdaq 100 to S&P 500 ratio has soared over the last 100 days
  • That's while the Financials to S&P ratio has cratered
  • Growth to value stocks have also seen a near-record bout of momentum

The post titled Gold miners take off while financials sink was originally published as on on 2020-05-07.

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