When Gold Takes the Lead and Equities Follow

Market analysts and chart technicians Kevin Wadsworth and Patrick Karim have examined a recurring feature of long-market cycles. Assets tend to move through extended periods in which either gold outperforms financial markets or financial markets outperform gold. These phases can persist for decades, and identifying which one is emerging often matters more than reacting to short-term market events.

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Gold’s price history reveals distinct multi-year advances rather than a continuous rise. Strong advances unfolded during the 1970s and again in the early 2000s, each following lengthy consolidation. The current advance shows notable similarities to those earlier periods.

From the late 2010s onward, gold moved above long-term reference levels that have historically separated rising phases from declining ones. These same conditions were present at the beginning of prior advances. This signals not just rising currency prices, but a broader phase of sustained strength.

At the centre of the analysis is the idea that every price expresses a relationship. When gold rises in currency terms, it reflects increasing strength relative to that currency. When it falls, the opposite applies.

Over long time horizons, purchasing power erosion introduces an upward bias into currency-based charts. This makes it harder to judge whether an asset is genuinely strengthening or simply reflecting currency weakness. Comparing assets directly against gold removes much of this distortion.

This approach can be illustrated through a comparison between gold and the S&P 500.  When the ratio rises, gold outperforms equities. When it falls, equities lead. These leadership phases have alternated over decades rather than years.

Historical data shows gold leading during the 1930s and 1970s, while equities dominated much of the post-war period. Each transition aligned with broader shifts in monetary and economic conditions. The current ratio structure resembles earlier turning points, with gold moving above long-term reference levels that previously capped its relative performance.

These developments point to more than a short-lived move. The evidence suggests the early stages of a broader regime in which gold begins to outperform equity markets. Such transitions often unfold gradually and can go unnoticed while equity indices continue to rise in currency terms.

The key distinction is that nominal gains do not necessarily preserve purchasing strength. Markets can advance in currency terms while losing ground when measured against gold.

Once leadership shifts, the implications extend beyond gold itself. Repricing assets in gold rather than currencies or equity benchmarks can reveal changes that remain hidden in conventional charts.

Using Microsoft as an example, the contrast becomes clear. Priced in currency terms, the stock continues to appear strong. When measured against gold, however, it has moved below long-term reference levels and key support areas, indicating underperformance relative to gold.

This divergence highlights an important warning. Assets can maintain positive currency trends while steadily losing strength relative to gold. Measuring performance through gold offers an alternative framework that focuses on preservation rather than nominal returns.

Relative performance often provides earlier insight than headline prices. Pricing markets through gold can clarify where strength is consolidating and where it is quietly eroding.

As previous cycles have shown, once leadership shifts become established, they tend to persist. Whether the current move develops into a prolonged phase will become clearer over time, but the early signals are already visible.

By focusing on relative performance rather than standalone prices, this approach offers a clearer view of long-cycle transitions. When gold begins to lead, measuring assets through gold can reveal risks that remain obscured when viewed only through currencies or indices.