This week’s breakout in gold is an epic expression of our times in which potential economic problems are quickly followed by massive actual and expected responses by central banks and governments. The problem de jour (for both markets and the public) is of course the real and scary health and economic consequences of a further spread COVID-19. So far, gold has been a beneficiary of the market’s response to the slowing growth prospects brought by the virus. We’ll explain why below.

But before we get to that, it may be useful to take a step back and examine how the gold price has evolved both in nominal terms and relative to stocks. As we can see in the chart below, it doesn’t take a master technical chartist to see that the price of gold stopped going down in 2015, went sideways from 2015-2019 and then “broke out” of two major resistance levels. The first such resistance level was $1300/oz, which was broken back in the middle of 2019. The second one was $1600/oz, which was broken this week.

In this second chart, we see that the S&P 500 has slowly started to underperform the barbaric relic beginning in late-2018 despite the S&P 500 having risen by 15% over that time frame.