Since August 2011 the S&P 500 has risen more than 700 points while the price of gold has fallen over $700:

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SPX_Gold_Weekly

At the gold peak in August 2011 the negative correlation between stocks and gold reached an unsustainable extreme (roughly 90% negative correlation depending on the time frame). As crazy as it seemed at the time, August 2011 turned out to be an opportune time to buy stocks and sell gold.

A similar situation currently presents itself, except this time the script is flipped; gold is highly out of favor while equity market participants have rarely been as bullish as they are now. I believe the following quote from legendary investor Howard Marks perfectly summarizes both aspects of the current extreme relationship between US equities and gold:

"When things are going well and prices are high, investors rush to buy, forgetting all prudence. Then, when there’s chaos all around and assets are on the bargain counter, they lose all willingness to bear risk and rush to sell. And it will ever be so."