Despite the strong performance by gold, there has been a long-standing stalemate between Gold vs Stocks... That stalemate looks set to break, and break big --- when it comes to chart patterns, the bigger the space, the bigger the break.
1. Gold/SPX hits the red line then fades (just like it did in 2011) -under this scenario, Gold prospers short term at the expense of SPX then we see a turnaround.
This is the bulls case of short term pain for stocks with a turnaround in 2H of the year, the Trumpian Hopium.
OR
2. Gold/SPX moves higher to breach through the multi-decade downtrend trajectory, igniting a rocket rally for the ratio.
This would be the apocalypse scenario of an equity meltdown (possible stocks down 30-50%) and Gold rising 20-30%, which could more than double the ratio.
Under (2) those with equities lose on their stocks and missing out Gold's rise (assuming they only invested in stocks). A $100k equity exposure with -30% decline ends with $70k, while $100k turns into $130k under Gold, and the difference is $60k, i.e a +30% return instead of a -30% decline.
