GDX vs SPY…Different This Time

The title is not meant to declare that this time gold stocks are going to exercise the excellent risk vs. reward stance vs. the US stock market.  But it is meant to declare that the stimulus for the recent out performance is much healthier than it was last summer during the last bounce.

Recall that was a time when Russia was sending armor into Ukraine and the pom-poms came out in the gold sector, as if geopolitics have anything to do with investment merit.

In the current case, commodities are tanking, the ‘real’ price of gold (vs. commodities) is rising and there is a whiff of economic contraction in the air.  That is much different than last summer.

The daily chart above shows a break above the recent highs in GDX-SPY and a green MACD.  And this time the only hype in the air that I can find is about how global deflation is going to destroy gold stocks.  If the macro environment is going negative, it is the proper one for a constructive case on counter-cyclical gold mining.

To review, here’s the big picture risk vs. reward chart that is compelling if indeed the global macro is shifting in favor of counter cyclical items (e.g. gold mining).

Also, here once again is the compelling big picture view of gold vs. commodities, which has indicated all along that we never officially exited the long-term global economic contraction environment.

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