Jeff’s Note: Today’s your last chance to watch my urgent briefing on the imminent $4 trillion “market snap.”
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The “Money Migration” has started…
On August 18, I argued that money would flow out of the broad stock market and into the gold sector.
The argument was simple…
Gold stocks were cheap relative to the S&P 500.
The broad stock market was overbought and overextended after rallying hard for six straight weeks.
And as money came out of the S&P 500 it would migrate toward the beaten-down gold stocks.
To support that argument, I showed you a ratio chart of the gold sector versus the S&P 500…
Here’s an updated look at that chart…
As this chart moves higher, it tells us the gold sector is outperforming the S&P 500. When the chart moves lower, gold stocks are underperforming.
The last “outperforming” period started in January when this ratio chart formed its first “higher low” (the first blue arrow). Gold stocks enjoyed a nice rally right after that.
But one plot on a chart doesn’t make a trend. The chart would have to make a second higher low to confirm the gold sector was indeed set to outperform for several weeks.
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We got the second higher low in late January. And you can see the massive rally that pushed the gold sector higher over the next ten weeks.
The recent action in this ratio chart looks quite similar to how things looked in January.
Take another look…
The blue arrow in late September marks the first “higher low.” Gold stocks enjoyed a nice rally right after that.
It looks like the action last week formed another higher low (the second red arrow).
If that’s accurate, then we now have a confirmed uptrend in place. That means the gold sector should outperform the broad stock market for the next several weeks.
It’s possible we could see a move similar to what happened back in February and March, as money comes out of the broad stock market and flows into the gold sector.
If so, gold stocks will be sharply higher by the end of the year.
Best regards and good trading,
What are your predictions for gold in the coming weeks? Are you bullish or bearish?
Let us know your thoughts – and any questions you have – at [email protected].