S&P 500 and Gold Prices

What does it mean and where might it go?

The S&P 500 to gold ratio is a crucial market indicator that measures the relative strength of the US stock market compared to the price of gold. This ratio indicates how many ounces of gold are required to purchase the S&P 500 index at any given time. When the ratio of the S&P 500 to gold is rising, it indicates that the S&P 500 is outperforming gold. When the ratio is falling, it can signal increased economic uncertainty. This ratio is crucial because it can provide insights into the market's risk sentiment.

Historical trends, such as the gold market's rally post-2000 and the peak in 2011, highlight the inverse relationship between these assets during economic and geopolitical stress periods.

1970s: The United States abandoned the gold standard on August 15, 1971 (Nixon Shock). The ratio fell from 2.40 to 0.17 between August 1971 and January 1980, indicating a negative period for equities and a positive period for gold. Late 1970’s are a major period of gold price increases due to h…