S&P 500 Priced in Gold

With equities correcting over the last few weeks and gold rallying to record highs, the price of gold has once again exceeded the price of the S&P 500. It now takes 0.96 ounces of gold to buy the S&P 500. This is considerably less than the long-term average of 1.74 since 1980, and a far cry from July 1999 when it took over 5.5 ounces of gold to buy the S&P 500. The question now is, if gold eclipses 1,100, will its time above that level be as brief as it recently was for the S&P 500?

click to enlarge

Comments

[Ricard:]

Looking at the beginning of this chart, one could conclude that gold is just getting started...

Nov 04 04:50 PM

[doubleguns:]

I am waiting for the dow to be priced equal to gold.

Nov 04 04:52 PM

[AtTheMurph:]

Beat me to it. Dow = Gold I think in the not too far off future.......

Nov 04 05:10 PM

[uss?:]

yeah isn't it the dow gold ratio that goes to 1 over time. The SPX is about 10% of the Dow.


On Nov 04 04:52 PM doubleguns wrote:

> I am waiting for the dow to be priced equal to gold.

Nov 04 05:11 PM

[uss?:]

yeah isn't it the dow gold ratio that goes to 1 over time. The SPX is about 10% of the Dow.


On Nov 04 04:52 PM doubleguns wrote:

> I am waiting for the dow to be priced equal to gold.

Nov 04 05:11 PM

[yellowhoard:]

I've seen Dow/Gold charts that go way back and we could overshoot Dow gold equivalence to degree that the Dow is about half the price of gold at an extreme.

Nov 04 05:26 PM

[DavyJ:]

Yawn. What difference does it make? Either you invested in one or the other or both. The past is past.

Now you're asking a question about the future. The truth is that I don't know and since you're asking I guess you don't know either. Yawn.

Nov 04 08:13 PM

[Steve in Gr...:]

The 2009 data makes this recent "rebound" in the S&P look pretty weak.

Nov 04 09:51 PM

[Sanjay John...:]

These people are trying to find a correlation between two unrelated variables-it is in their mind only that gold prices and SP500 prices have a relationship. The major buyers and users of the world's gold don't even know what the US based SP500 is, do you think there ought to be a correlation at all?
Please read Taleb's "Fooled by Randomness"-for some excellent explanations of this-I really can't do justice to his book by trying to explain it here.
These guys are being fooled by randomness-Divide the SP500 by average rainfall in 100 different cities of the world and you will come up with the same graph as the one above for at least one of those cities which will look exactly like this graph of SP500 vs. Gold price.

Sanjay John Gandhi
sanjayjohn.com

Nov 05 12:50 AM

[oldgoldbug:]

Gold and the Dow have traded near equivalency twice - once when the gold price was pushed to $35 in 1933 (not sure about the actual date) and I think the Dow came close 40+/- and again in the 80's when gold hit 875 and the Dow did as well. So with Dow near 10K and Gold at 1.1K theres a lot of room to roam. It is important to keep in mind a mere 50 years separated the two equivalency events.
BTW, I really enjoy all the pundits who keep talking about gold's performance from the high in the 80's and not when it was allowed to float in the 70's. The starting point makes a big difference on the Return on Investment. If they do that they should measure stock returns from the high of 1066 in 1966.


On Nov 04 05:11 PM uss? wrote:

> yeah isn't it the dow gold ratio that goes to 1 over time. The SPX
> is about 10% of the Dow.

Nov 05 02:02 AM

[Old Trader:]

I fall into the camp that believes that gold isn't about MAKING money...its about KEEPING your money (or rather, the purchasing power of whatever amount one has).

Nov 05 06:13 PM

[ebworthen:]

This shows a realization by investors that stocks are worth less than they thought and gold is worth more.

They have moved in opposite directions as people have realized that currency and stocks are pieces of paper (or now - digits in a database) while gold is tangible and cannot be wired across the oceans nor monitored and taxed and garnished as the database assets are.

Nov 09 02:17 AM