Gold stocks versus the stock market

When reviewing the long-term performance of the gold sector in previous TSI commentaries we looked at performance in nominal dollar terms and in gold terms, but as far as we can recall we never looked at performance relative to the broad stock market. This is an omission we are now going to rectify.

The following weekly chart shows how the Barrons Gold Mining Index (BGMI) performed relative to the broad US stock market (as represented by the S&P500 Index) from 1960 through to this week. Clearly apparent on this chart is the secular bull market in gold-stock relative strength of the 1960s and 1970s, the secular bear market in gold-stock relative strength of the 1980s and 1990s, and the secular bull market in gold-stock relative strength that began in 2000. Also clearly apparent on this chart is that the secular trends contain many counter-trend moves. During the gold secular bull market of the 1960s and 1970s these counter-trend moves were sometimes dramatic and lasted more than two years. During the current secular bull market the counter-trend moves have been far less impressive, but even though they look trivial on the long-term chart they can still feel dramatic in real time.