Gold/S&P 500 Ratio Hits New 5-Month High of 0.4738

On June 26th, NIA sent out an alert entitled, "U.S. Budget Deficit Correlation to Gold/S&P 500 Ratio".

In it, we discussed two important things:

1) In recent years, we have had the lowest Gold/S&P 500 Ratio in history at a time of large budget deficits. At times of U.S. Federal budget deficits equal to -4% of GDP or worse, the median Gold/S&P 500 Ratio has historically been 1.044, but this is including the past few years of Big Tech Stocks fueling the most overvalued U.S. stock market in history. Prior to 2018, when the U.S. Federal budget deficit is equal to -4% of GDP or worse, the Gold/S&P 500 Ratio has ranged from a low of 0.715 on March 10, 1993, to a high of 3.557 on February 1, 1983, with the median being 1.21.

2) When the U.S. 10-1 Year Yield Spread inverts to a level of -0.45% or lower, a large increase in the Gold/S&P 500 Ratio always follows 100% of the time. The deeper the inversion of the U.S. 10-1 Year Yield Spread, the larger the increase in the Gold/S&P 500 Ratio. The big move higher in the Gold/S&P 500 Ratio always begins when the U.S. 10-1 Year Yield Spread begins to normalize upward. The Gold/S&P 500 Ratio always continues to rise for multiple years and doesn't stop after the U.S. 10-1 Year Yield Spread returns to positive territory.

On July 6th, NIA sent out an alert entitled, "10-Year Yield Is Breaking Out".

In this alert, NIA said, "The 10-year yield is breaking out today rising 12.5 basis points to 4.061%. A normalization in the yield curve from the 10-year yield going higher is something that nobody is expecting or positioned for and IF this continues (it is way too early to know for sure) it will be similar to the 1970s when gold made its largest upward move in history."

NIA went onto explain, "Having the yield curve normalize by the 10-year yield going higher is something that NIA has speculated about several times in recent weeks at a time when nobody else has even mentioned this possibility. Over the last twelve months, the iShares 20+ Year Treasury Bond ETF (TLT) has seen massive fund inflows of $21.495 billion vs. SPDR Gold Trust (GLD) seeing significant fund outflows of -$5.903 billion. Despite this, compared to one year ago... GLD is up by 4.38% vs. TLT down by 10.62%! If the 10-year yield continues higher investors will be forced to dump TLT and load up on GLD, which will rapidly send gold to new all-time highs!"