S&P 500/Gold Ratio 1970–2025
Source: www.stockcharts.com
S&P 500/Silver Ratio 1970–2025
Source: www.stockcharts.com
Usually what we show is the Dow Jones Industrials (DJI)/Gold or Silver ratio. Instead, we are using the S&P 500 (SPX), a much broader market to measure things. No surprise – the chart of SPX/Gold/Silver is similar to DJI/Gold/Silver. Before 1970, the ratios bottomed in 1932 and topped in 1966, matching the stock market bottoms and tops at the time. Nonetheless, the ratios are quite useful in measuring whether one should be in the stock market or, instead, in gold and silver (and related stocks).
Thus, it is no surprise that, because of the run-up in gold and silver prices during the 1970s, coinciding with a difficult period for stocks, the ratio bottomed in 1980 with gold peaking at $875 and silver near $50 (the infamous Hunt Brothers attempt to corner the silver market). The 1970s was an inflationary period (stagflation), coupled with recessions in 1969–1970, 1974–1975, and culminating in the 1980–1982 steep recession.
The 1980s and 1990s saw the two flip places as stocks roared and gold and silver languished. The period culminated in the dot.com/high-tech bubble of the late 1990s. The 2000s was a period of turmoil with the 2001–2002 recession, followed by the global financial crisis and Great Recession of 2007–2009. It was also a period of war with the 9/11 attacks and the subsequent wars in Afghanistan and Iraq. Wars that became never-ending.
After the ratio bottomed in 2011 with gold over $1,900 and silver again near $50, a period followed where stocks ruled over gold and silver, thanks to ultra-low interest rates and QE. The wars in Afghanistan and Iraq continued but eventually ended. We now appear to be culminating in the AI bubble, not dissimilar to what happened in the late 1990s. It’s against the background of geopolitical and domestic political instability. Both the SPX/Gold ratio and the SPX/Silver ratio have now firmly broken to the downside, suggesting another period of gold and silver outperforming stocks.
Based on the topping patterns, the SPX/Gold ratio could fall to at least 0.78. Holding SPX steady at 6,715, the level at time of writing, it suggests gold could rise to $8,600, some 100% above current levels. As for silver, the pattern is similar and again holding the SPX at current levels of 6,715 the ratio could fall to 36.45, suggesting silver could rise to $184, some 250% above current levels.
The targets could change, depending on the value of SPX going up or down. Both targets are above the lows seen in 1980 and 2011. If somehow the ratios reached those lows, gold’s targets could be $50,000 and silver’s target $3,000, both based on the 1980 low. As to the 2011 low, gold’s target could be $11,300 and silver at $260. Again, that’s based on holding SPX steady at 6,715, the current level at time of writing.
Both gold and silver (and gold stocks) are currently going parabolic. That’s a dangerous market and we are quite overbought. A correction could occur, even a sharp one. However, the breakdown in both the SPX/Gold ratio and the SPX/Silver ratio implies both gold and silver have the potential for considerably more gains as the ratios fall relative to the SPX.
Source: www.stockcharts.com
When the talking heads stop talking about AI and note the huge run-up in gold prices, and talks of $5,000 or higher get louder, it’s no surprise that one can get whacked thinking we are just going to keep going up forever. Gold made what looks like an outside day key reversal on Friday. If that’s correct, it could definitely signal a top, even if it turns out to be just temporary. What a day – we closed down $77.82 Friday, but the day range was $189.60. Can’t say we’ve seen that before.
We’ve noted before that we could be expecting a low in the November/December period. And Friday’s action is signalling that’s a real possibility. We note that gold at $1,045 in December 2015 was an important 7.8-year cycle low. Next up was the low at $1,613.60 in September 2022 which was 6.8 years from the 2015. That’s 81 months, which is a bit shy of Merriman’s (www.mmacycles.com) range for the 7.8-year cycle of 86–102 months. There was a secondary low in October 2023 at $1,809.50 and it was from that level that the current run-up got underway. That’s 94 months from the December 2015 low. That fits better. If that is correct, then the next 7.8-year cycle low is due around 2030/2031. That means we are early in the cycle and this appears to be forming a 31-month cycle low, the first of three over the next 7/8 years. As a result, after this correction we should move higher once again.
On the week, gold made new all-time highs again at $4,379. Some softening of the stance against China helped, along with ceasefires in Gaza (that won’t last) and talks of a ceasefire in Russia/Ukraine. Still, the reversal left gold up 5.4% on the week and 60.3% on the year. Silver gained 3.5%, also to all-time highs and up 77% on the year. Platinum joined the party, up 0.4% on the week to new 52-week highs. Platinum is up 76.3% in 2025. Of the near precious metals, palladium gained 4.6% to new 52-week highs while copper was up 3.1%. A great week for the precious metals, but then came Friday, spoiling the party.
A correction is coming. It is not such a bad thing because, as we note, it should be temporary, although it could easily last into year end. It’s been a great year for the precious metals, so some profit-taking seems reasonable, expected, and overdue given the overbought conditions.
Source: www.stockcharts.com
Was Friday an outside day key reversal for silver? Silver made a new all-time high on Friday at $54.45, then reversed and closed below the low of the previous day at $51.88, down 4.3% on the day. The previous day’s low was $52.48. That fits the definition of a key reversal. Grant you, we’ve seen these patterns bust before we’d have to wait and see if we break under $47 to confirm the breakdown. We’ve been very overbought for weeks now. So, a correction is overdue. Despite it all, silver still managed to close up 3.5% on the week. It was the biggest drop for silver in six months on Friday despite silver ending the week up.
There was an apparent shortage of silver in London, which gave way to silver prices going into backwardation (spot prices above the nearest futures contract). That was still the case on Friday; however, it had eased somewhat. Despite it all, silver has surged 77% in 2025. But the more recent moves seem to be too much, too fast, too soon. Hence, profit-taking may be in order. Support is seen at around $43 and that might not be an unreasonable target. The former high near $50 could also be support and it would be a good spot for silver to consolidate. Silver could just gap down soon, so be aware.
Source: www.stockcharts.com
It has been quite a year so far for the gold stocks. Both the Gold Bugs Index (HUI) and the TSX Gold Index (TGD) are up over a 100% this year with the HUI last up 131.1% and the TGD up 124.5%. But are we now facing an overdue correction? It appears that is possible as both indices spiked this past week to new highs, then turned down on Friday with the HUI losing 7.3% and the TGD down 7.2%. It was the worst one-day loss for those indices we can remember. That didn’t stop them from making new all-time highs once again and closing up on the week with the HUI up 3.9% and the TGD up 3.8%. Sounds great. They endure a big down day Friday and still close up on the week.
But what about next week? Follow-through to the downside would not be a surprise as we try to work off some of the overbought conditions. A healthy correction could be 20%. We saw that occur on the march in 2010–2011 to new all-time highs. The 200-day MA for the HUI is at 413 while for the TGD it is at 504. From current levels that would be down 35% for the HUI and down 34% for the TGD. We don’t think it will be that bad but it does point out the downside risk. And it can occur in a hurry. The word seems to be to take some profits. A breakdown under 718 and under 700 would signal lower prices for the TGD. Under 660 would signal even lower prices.
– Copyright David Chapman 2025
Disclaimer
David Chapman is not a registered advisory service and is not an exempt market dealer (EMD) nor a licensed financial advisor. He does not and cannot give individualised market advice. David Chapman has worked in the financial industry for over 40 years including large financial corporations, banks, and investment dealers. The information in this newsletter is intended only for informational and educational purposes. It should not be construed as an offer, a solicitation of an offer or sale of any security. Every effort is made to provide accurate and complete information. However, we cannot guarantee that there will be no errors. We make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the contents of this commentary and expressly disclaim liability for errors and omissions in the contents of this commentary. David Chapman will always use his best efforts to ensure the accuracy and timeliness of all information. The reader assumes all risk when trading in securities and David Chapman advises consulting a licensed professional financial advisor or portfolio manager such as Enriched Investing Incorporated before proceeding with any trade or idea presented in this newsletter. David Chapman may own shares in companies mentioned in this newsletter. Before making an investment, prospective investors should review each security’s offering documents which summarize the objectives, fees, expenses and associated risks. David Chapman shares his ideas and opinions for informational and educational purposes only and expects the reader to perform due diligence before considering a position in any security. That includes consulting with your own licensed professional financial advisor such as Enriched Investing Incorporated. Performance is not guaranteed, values change frequently, and past performance may not be repeated.
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