Traders Are Dumping Stocks and Buying Gold and Silver

Gold and silver have outperformed the S&P 500 by 8 percentage points over the past month as traders choose precious metals over stocks to stash cash.

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"Gold is more valuable at this juncture as the flight to quality accelerates," said Stephen Weiss of Short Hills Capital. "Global equity indices will all be in decline as multiple growth engines sputter: US, China, Eurozone and Japan. Only place is commodities, and specifically gold, because that is where perceived safety and momentum will be."

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Over the last 80 years, gold has traded, on average, about 1.5 times the S&P 500, but traded as high as six-times the S&P 500 back in 1980 when inflation damaged the value of the dollar, according to John Roque, a technical strategist for WJB Capital. Roque, who like a lot of chart analysts, studies this ratio quite closely, is seeing a bullish breakout in gold.

For the metal to get back to its average price relative to stocks, it would need to increase 23 percent to $1900 from its current level around $1540.