Ratio of Copper vs. Gold at 30-Yr Support, Last Reached Pre-Crash Apr-87, During GFC Jan-09
In the chart below the ratio of copper vs. gold is about to hit 30-year support.
This ratio has been touched only two other times over that 30-year history – once in Apr-87 prior to the Aug-87 equity market peak and another in Jan-09 amid the GFC, just as EM equities were bottoming and a month before DM ones did the same.
In both previous situations the ratio’s descent to 30-year support was indicative of either the build-up of major internal market imbalances just prior to a crash (Apr-87; SPX had 14% incremental upside into Aug-87 peak) or the release of those imbalances amid an active crash (Apr-09).
Obviously, with the SPX sitting at an all-time high this week, the current back-drop is more similar to where we stood in Apr-87 pre Oct crash vs. Jan-09 whereby the imbalances that had built from 2002-2007 had also nearly been fully released following a ~45% sell-off by that time.
Conversely, aside from the SPX, the past two times the ratio of copper vs. gold was at this support, copper was at a major low both times whereas gold was at a relative peak in one (87), but poised for more upside in the other (09).