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S&P 500 and Gold Bugs index had pretty much a -1 correlation from 1997 to 2000. Then what? The -1 correlation continued as SPY fell 50% and Gold Bugs index rallied over 200% in the next couple of years. From 2003 to 2011, SPY & Gold Bugs correlated to a high degree.
Since 2011, SPY & Gold Bugs have pretty much had a -1 correlation again. At the same time the Gold bugs index is on a 10-year support line (right chart).
Last week Joe Friday discussed the potential for a Generational Opportunity in the gold miners (see post here)
Odds of this repeat are? Most would say low and I understand why. Remember…“It’s Not the odds of an event happening that is key….its the IMPACT if it does!”
Does this mean S&P 500 will fall 50% and GDX will rally 200%+? Nope-
The take on this post is…We haven’t seen this size of a -1 correlation in a long time and this is where trends can reverse!
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