Chart of the Week: S&P500/Gold ratio

S&P 500/Gold ratio
click for larger graph


Source: Chart of the Day

The chart above was created by dividing the S&P 500 by the price of one ounce of gold. This results in what is referred to as the S&P 500/gold ratio or the cost of the S&P 500 in ounces of gold.

Chart of the Day notes "it takes 2.45 ounces of gold to “buy the S&P 500.” This is considerably less that the 5.53 ounces back in the year 2000. When priced in gold, the 2002 to 2005 stock market rally didn’t amount to much. In fact, the short-term trend is down and nearing the 2003 lows."

UPDATE January 9, 2005 12:21pm

A commentor references these charts below as showing very similar the long term ratio cycles to our 100 year Bull/Bear Cycles(Click for larger graphics)



Source:  The Golden Constant Steve Saville, 26 Jul, 2005

As Saville makes clear, "an ounce of gold today is the same as it was 5000 years ago and the same as it will be in 5000 years time;" However, Corporate earnings, paper money, treasuries are all subject to a variety of other factors. Hence, the relative importance data priced relative to a nonfluctuating basis, such as gold. (One caveat: total mined tonnage of gold continues to rise, so supply is an issue).

Nice find!


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