What A Great Movie.

Although it was a funny fictional tale made some 36 years ago, there is still some, if not a great deal of truth to the way markets and people behave, especially when money is involved.

Up one day, down the next, with neither rhyme, nor reason to account for the moves.

Precious metals and equities have done quite well this year, with the monthly average price of gold up 19.3% on a year to date basis, and the S&P 500 gaining 16% YTD, also on a monthly average basis.

But when we step back to take a longer term look at how these markets perform, it’s a real eye opener.

The first chart in this month’s missive illustrates gold and the S&P together over the past 30 years, and it quickly becomes clear that these two key markets do indeed trade places over time with investors throughout the world.

In January 1990, gold averaged $410 as compared to $1,493 last month. That’s a gain of $1,083, or a 264% increase in value from point A to point B, and forgetting about all the ups and downs in between.

The S&P 500 averaged 340 in January 1990, as compared to 2,978 last month, representing a 2,638 point advance, or + 776% over the period.

While some may call this an apples & oranges comparison, and it might well be, it nevertheless shows how important market trends ebb and flow, for a variety of reasons over time.

The second chart in illustrates the buying power of gold relative to the S&P 500. Here too, we see the cyclical nature of things.

As for other markets, it was a mixed picture overall last month, but copper was able to eke out a small gain during October, putting it within striking distance of crossing its 5 month moving average.

Otherwise, it’s the same old story – inventories are low across the board, and prices are just shrugging their shoulders.

On another note, we will be speaking at the American Copper Council Annual Fall meeting in Miami next week, and hope to see you there.

Regards,
John E Gross

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