by Daniel Amerman
As shown in the graph below, the first half of 2020 produced an unusual change in the relationship between gold prices, stock prices and recessions, something that has only happened twice before in the last fifty years. Each of the two previous times this has occurred after a long run up in stock prices, it has been part of a cyclical change to a cycle favoring gold over stocks for a decade or more thereafter.
What the graph shows is the rolling 2 year advantage to gold over stocks on a monthly average basis, expressed in percentage terms. (So that monthly average prices for June of 2020 were compared to prices for June of 2018, average prices for February of 1982 were compared to those of February of 1980, and so forth). Where the area of the graph is gold, there is a two year running advantage to gold, and where the graph is green, there is a two year running advantage to stocks.