What 'Cheap' Gold May Mean for the S&P 500

Historically, low gold prices have translated into above-average gains for the SPX

Jul 22, 2015 at 3:12 PM
facebook X logo linkedin


Gold has been skimming multi-year lows for the past few days, and mining stocks haven't done any better. But what might that mean for the broader market? With that question in mind, I decided to enlist the help of Schaeffer's Senior Quantitative Analyst Rocky White to see if he could shed any light on the implications of "cheap" gold for the S&P 500 Index (SPX).

Below, you'll see a chart that shows how the SPX has performed across various time frames, following at least four-year lows on gold -- a signal we got last Friday, for the 10th time since 1980. In order to qualify, signals had to be at least six months apart.

Looking at the data, four-year lows have tended to be bullish for the SPX -- especially over the long term. In the month following the last nine signals, the SPX averaged a gain of 1.6%, and was positive two-thirds of the time. By contrast, the index's anytime one-month return is just 0.8%, and positive 62% of the time.

Even more impressive, going out to the six- and 12-month columns, the SPX has been positive 100% of the time following prior signals, with an average advance of 8.3% and 18.2%, respectively. By comparison, over a typical six-month window, the SPX is positive 73% of the time, with an average gain of 5%; and over 12 months, it's higher 78% time, with a typical advance of 10%.

150722goldlows1

The last time we saw a four-month low in gold was last November, and as the chart below demonstrates, the returns have been positive once again -- with the one-year result still to be determined. Interestingly, prior to that November signal, we hadn't seen a four-year low in gold for more than 15 years -- by far the longest span we've observed over roughly 35 years' worth of data.

150722goldlows2

 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI