The Citigroup / Gold Ratio

In 2001, an investor who wanted to exchange his gold bullion for Citigroup (C) shares was able to acquire about six shares of stock for each ounce of gold. With Citigroup closing just under $2.00 Friday and gold above the $1000.00 mark, that same swap now entitles the holder of gold to about 514 Citigroup shares.

The change in fortunes says much less about gold, which is almost 300% above the 2001 lows, than it does about Citigroup, which has fallen about 96% from an early 2007 high.

This week’s chart of the week chronicles the ratio of gold continuous contract futures to the price of Citigroup stock, essentially tracking the exchange rate for Citigroup in gold since the beginning of 2007. In many respects, this chart is also an excellent proxy for the magnitude of the problems facing the U.S. banking system.

[As an aside, now three months old, the full history of the VIX and More Chart of the Week series can be found by following the chart of the week link.]

(Click to enlarge)

[source: StockCharts]

Comments

[mr freddo:]

Thank you for pointing out that gold has gone up while Citi has cratered. More importantly, where is that line going? I guess if Citi goes to zero, this chart hits infinity?

Feb 22 06:06 PM

[drone:]

Meaningless, useless article.

Feb 22 06:34 PM

[Rebounder:]

absolutely waste of time to read this garbage article

Feb 22 09:33 PM

[Adam Sharp:]

A chart comparing gold vs money supply might have made more sense.

BTW, please kill that music on your website :) It's horrific.

Feb 22 09:41 PM

[Mad Hedge F...:]

Gold continues to move from strength to strength, hitting a new high for the year of $1,007 today. In January, gold ETF’s bought a record 104 tonnes of the yellow metal. Last week alone, purchases soared to an astonishing 110 tonnes. There has also been huge buying of December, 2009 1,000 calls, suggesting that some players are hoping for a melt up if we break the old highs at $1,050. Looks like we have found our new bubble. Let the games begin! If you have been regularly reading my letter you should by now have sacks of gold American Eagles stacked up against the walls, your portfolio is brimming with gold mining stocks like Barrick (ABX), Freeport McMoran (FCX), and Rangold Resources (GOLD), and your safety deposit box is groaning from the weight of the gold bars it is holding. Gold has since become the trade of the first quarter, with the open interest on call options on the Street Tracks Gold Shares ETF (GLD) exploding from 445,000 to 1.1 million in just the past few weeks. Options implied volatilities are suggesting that gold could hit $1,115/ounce by June. Oops, you forgot to buy the yellow metal? Use $50 pullbacks to get long. Investors will continue to pour into the sector, since it is one of the few things the government can’t create more of with a printing press.

Feb 22 09:44 PM

[B. Ray:]

It is an interesting comparison, but it do make C holders embarrassed.

Feb 23 05:25 AM

[css1971:]

The ratio simply gives the level of faith that people have.

Citigroup is a banking insutution, based on a clearly failed fractional reserve system. Says a lot about human honour and trustworthiness.

Gold simply is.

Feb 23 07:15 AM

[pockyclips ...:]

You'd have more validity comparing Citi to tulips

Feb 23 08:38 AM

[LanceLink:]

Somewhat interesting, but a cheap shot.

Feb 23 09:26 AM

[foxy 44:]

why compared C to Gold, crazy!!!
DJ and Gold ratio Yes, nothing else, when you see DJ 5000 Gold 2500 is time to sell, or little bet early.

Feb 23 11:44 AM

[nevket240:]

Try Gold $3000/Dow 3000 end of 2012


On Feb 23 11:44 AM foxy44 wrote:

> why compared C to Gold, crazy!!!
> DJ and Gold ratio Yes, nothing else, when you see DJ 5000 Gold 2500
> is time to sell, or little bet early.

Feb 23 01:38 PM