• 58 mins Copper Glut Continues To Grow
  • 16 hours How A Pandemic Made Americans Better Workers
  • 20 hours The Trillion Dollar Space Race Crosses Another Milestone
  • 24 hours Gold Prices Fall As Stock Market Sentiment Turns Positive
  • 2 days Conspiracy Theories Set Tone For 5G Cold War
  • 2 days Working From Home Will Transform The Energy Industry
  • 2 days The Multi-Billion Dollar Race For A Vaccine
  • 2 days Can Domestic Tourism Bolster Emerging Economies?
  • 2 days Australia Considers $100 Million Investment To Kickstart Mining Industry
  • 2 days Has Re-Opening The Economy Been Successful?
  • 2 days Gold Miners Still Have Massive Upside Potential
  • 2 days The Risky World Of Oil Hedging
  • 2 days Africa Turns To Innovation Amid The Global Pandemic
  • 2 days COVID-19 Sparked A Bicycle Boom
  • 2 days Will Government COVID Intervention Cause Inflation?
  • 3 days The Bitcoin Miner That Is Paid To Do Nothing
  • 3 days Capital Gain vs. Capital Consumption
  • 3 days Tesla’s Latest Battery Innovation Ready For Use In China
  • 4 days China Targets Hong Kong As Cold War With US Heats Up
  • 5 days No Shirt, No Shoes, No Mask, No Service
How To Play The Next Big Rally In Gold

How To Play The Next Big Rally In Gold

The global impact of COVID-19…

Does Gold Still Have Some Room To Run?

Does Gold Still Have Some Room To Run?

The gold-silver ratio keeps going…

Mining.com

Mining.com

Mining.com

MINING.com is a web-based global mining publication focusing on news and commentary about mining and mineral exploration. The site is a one-stop-shop for mining industry…

Contact Author

  1. Home
  2. Commodities
  3. Precious Metals

Gold Is Still Cheap Compared To Stocks

Gold Stocks

The gold price was drifting sideways on Thursday, down some $50 an ounce from a brief (but glorious) near seven-year intraday high above $1,600 an ounce a fortnight ago. 

But the metal remains firmly in a bull market with a 20%-plus rise over the past year. Go back 20 years, and the rally is even more spectacular considering at the turn of the century gold was trading for a relative pittance of $270 an ounce.

Macrotrends

Is gold overvalued at these levels? Has the rise been too far, too fast? Are gold bugs (once again) guilty of irrational exuberance? 

In comparison to stock markets, the answer is a resounding no. The gold price’s underperformance relative to the record–setting S&P 500 Index is stark. 

Today, you need little over two ounces to buy the market. The ratio was the same in September 2007 when an ounce of gold could be picked up for less than $600. 

The average over the long term – and we’re talking 90-years here – is 1.31. 

Since the US left the gold standard entirely in August 1971, it’s 1.55. That implies a fair value for gold north of $2,400 an ounce, which either means gold bugs’ party has only begun or stocks are in for a real beating.   

You can argue that during gold’s spike in 1980 to $850 an ounce – in inflation-adjusted terms still the all-time high – it lost touch with stock values (and some would say reality) entirely.

But the recent peak – when gold hit a record around $1,900 an ounce in 2011 – did not constitute a wild deviation from the norm and based on relative value could be in reach once again.

By Mining.com

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment