The Stock Market Looks Different When Measured in Gold

2 hours ago

The S&P 500 has reached new highs in U.S. dollars since 2000, but when measured in gold ounces, it has not reclaimed its 2000 peak, highlighting that the choice of measuring stick alters the narrative.
Gold serves as a useful alternative denominator because, unlike fiat currencies, it cannot be printed, offering a perspective on value relative to a non-expandable asset.
Key ratios like SPX/gold, Dow/gold, and Nasdaq/gold show that while stocks may rise in dollars, they can underperform against gold, indicating different regimes: financial-asset dominance versus hard-money dominance.
Nominal returns (dollar-based), real returns (inflation-adjusted), and gold-adjusted returns can diverge significantly; for example, post-2000 S&P 500 returns are positive nominally but flat-to-negative in gold over long periods.
The SPX/gold ratio is a relative measure, not directional; it indicates whether stocks are outperforming gold, which can occur in various market conditions, not necessarily when stocks are rising.
Important caveats include that starting comparisons from 2000 skews results due to high valuations, price indices exclude dividends affecting returns, and gold differs from CPI as it reflects monetary factors like real rates and liquidity.
Future movements in the ratio depend on scenarios such as stocks rising faster than gold or gold outperforming stocks, with the ratio indicating current regimes rather than predicting future outcomes.

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