Buy STOCKS heavily and dump GOLD according to this ratio.It is not the first time we use the SPX/GOLD ratio (S&P500 to XAUUSD) for a macro analysis and certainly each time it manages to offer us different and very helpful insights. This time on the 1W time-frame, the ratio is consolidating these past 2 weeks but after having broken in late May - early June above the 2022 Lower Highs trend-line.
That alone is a strong bullish signal and a look in the past 10 years shows that this is a cyclical pattern that has already been formed twice. The SPX/GOLD ratio following its market peak, enters a Descending Triangle (which is during a time of risk crisis in the markets) where Gold starts to outperform the S&P500 (stocks), a natural move as the yellow metal is a safe haven.
Then as the Triangle's Support holds, the price breaks above the Lower Highs and starts the new Bull Phase. Exception is of course the March 2020 COVID crash, which is a Black Swan event and doesn't count as technical. If it wasn't for that, the price would continue breaking above the Lower Highs as the rest of the fractals. In addition, the 1D RSI breaking above its own Lower Highs trend-line, is a similar buy signal.
Currently, since the ratio is significantly above not just the Lower Highs trend-line (RSI as well) but also the 1W MA50 (blue trend-line), we can expect it to reach the 2.68 Resistance within 6 months.
Naturally, as the title says, this means for investors to buy stocks at the expense of holding Gold. This is translated that we are in a Bullish Phase (risk-on) where buying assets like stocks offer more return than Gold, which should be converted to riskier assets.
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