S&P500 Priced in Gold
pricedingold.com
pricedingold.com
S&P 500 Investment (with Dividends Reinvested) Historical data shows that $10,000 invested in the S&P 500 at the start of 1950, with all dividends reinvested, would grow to approximately $3,836,763 by the end of 2025.
Gold provided pure price appreciation (no yield or dividends). The multiplier is about 124.7× ($4,360 ÷ $35), or an annualized return of roughly 6.8% over 75 years.
Ounces purchased in 1950: $10,000 ÷ $35/oz ≈ 285.71 ounces
Current value: 285.71 oz × $4,360/oz ≈ $1,246,700
Wait...I might want something more secure than that. And if I have a lot of gold I might need to pay people to protect it. These storage costs are going up.
Well, you can't do much to correct for the speculation noise in gold. But maybe we can attack from the other side. Maybe we could record prices for various representative products in a giant data set somewhere and calculate and record, I dunno, a "price index" that normalizes the prices to a value that is stable over time.
I bet people would pay good money to look at a chart like that. Maybe we could find one.
Are CPI measurements difficult? Sure. It takes a bunch of expert eggheads and a lot of shouting to come to consensus. Still better than trusting some kind of magical commodity market to tell you.
Not to suggest CPI is redundant, there's a reason why central bankers read it after all. For one, it's the most timely data they have. But it's impossible to nudge it year after year -- accumulative error -- without it become obviously decoupled from other data, including the long-term bond market data. It just so happens commodities are the wrong yardstick.
easy to explain. Gold has a supply constraint. More demand causes prices to rise. When you have a currency following a heavy inflationary trend, people buy Gold, so the price of Gold goes up.
There are a shocking number of gold-happy nerds on this site who are going to be shocked and horrified the next time it crashes (which is has, and will again). The nonsense the largely-partisan smarter-than-thou media you're watching is feeding you is nonsense, and at some point you're going to discover that via great suffering.
I like to think about the inherent contradictions of goldbugs going long on central bank portfolio policy: they both tend to distrust the central bank but in a way the central bank activities partially endorse their habits, and are the source of recent appreciation and thus accusations of "hidden" inflation. But central banks operate in an anarchic world system where they need something even independent of reserves held in other sovereign currencies, I presume most gold bugs are holding ETFs in an existing financial system (which is non-orthogonal: if you assume a financial system, why not avail yourself of the superior alternatives?) or have it in a safe in their house which has some other obvious problems.
I hold no gold, if I want hydraulic and non-volatile inflation compensation, it's quite simple: short-dated sovereign debt, aka the humble money market fund, which can be seen as the lower-fee version of the checking account. Nobody likes being a sucker, holding debt for below the time value of money, including changes in nominal value. It has immense price discovery pressure, and it finds its level nicely. If I were to hold gold, I would need some viable theory about how much I should hold to be de-correlated from other assets to be worthwhile. Maybe if I was exposed to jewelry costs and wanted to hedge them.
See https://www.jpmorgan.com/insights/markets-and-economy/market..., https://www.ecb.europa.eu/press/other-publications/ire/focus...
These have been outpacing CPI because they're levered by cheap debt, brought to you by central bank actions that keep rates low so governments can play the same levered games with their own runaway fiscal policies.
Because there's a lot one could write about each of: equities, real estate, gold, silver, platinum (which have very different industrial exposures), and bitcoin, which have many price drivers.
So let's try something more parsimonious: what do you make of people, institutions, etc that bid on short and even long-dated sovereign debt around the globe, and come up the collective discovered price of, say...3.5%, annualized, for maturity in a month? https://www.treasurydirect.gov/auctions/announcements-data-r...
I bet that thing would be a pretty useful monetary tool, even if it were attacked, as one might expect by all of the government and banks around the world who were trying to cling to the power they have by virtue of having captured the ability to print money and use it when it is most valuable, fresh off the press.
Who's your alchemist? Get a better one.
I need to see both of them priced in loaves of bread.
But the worst is mass migration an the bulge of the world population pyramid entering working age [1]. Labor costs down for corporations and our wages evaporate. Compound with AI and automation.
I think the future is very unpredictable.
The Fed tried to measure dollar supply globally for decades before giving up as they finally got their heads around how the Eurodollar network works, and they've kept somewhat quiet about the fact that they're just not actually at the center of it.
S&P on its own is up 20 fold since 1990
SP500TR Is up 40 fold.
History of what now? Gold is a volatile commodity. It has crashed, many times, often catastrophically, and had bear markets that dwarf anything you see in stocks.. A quick search tells me that inflation-adjusted gold prices dropped like 80% between 1979 and 2000.
And given its value right now, it's probably due for another.
Given all that, it's easy to see why the value of gold has plummeted during the 70s - 00s. Though I could see two reasons as to why gold prices are rising during the last decade:
- Gold is actually just a part of the asset bubble (in the same group as housing, stocks, and crypto), and investment in it is aided by too much money printed by the US government not being used towards productive ends but towards rampant asset speculation.
- The current era of neo-liberalism is going to end pretty soon, and some goldbugs are rooting for the revival of late 19th-century classical capitalism, where gold was actually the international standard. I think this is very unlikely though, even if the US dollar loses its status with the end of the petrodollar system. My guess is we're going to deal with free-floating currencies for quite some time, especially when wars are going to happen and governments have to print more money to sustain their war efforts. (I think the best monetary system would be neither gold or crypto, but instead something like the Bancor (https://en.wikipedia.org/wiki/Bancor))
For the working classes, the peak was the dotcom bubble - everything after that has been repeated speculative bubbles attempting to create explosive growth from nothing of substance, as much a deliberate decision of Capital to weaken the working classes while extracting wealth as it was a desperation gambit by an increasingly stable (but not yet stagnant circa mid-2000s) western hemisphere and its governments. Gold alone isn’t an indicator of this, so much as all asset prices skyrocketing to the moon while worker wages remained relatively flat and precarity increased. Metals, securities, housing, land, all of it has appreciated faster than working wages have kept pace, reflecting a siphoning of that wealth into fewer hands.
Gold just makes the story “neater” to tell to folks lamenting the heyday of Breton Woods.
The price of gold before 1933 (EO 6102) was also not a terribly good indicator, as the friction of taking physical delivery of it also kept it suppressed in most circumstances, with explosive swings in times of crisis.
Arguably it's even more gamed after 1971 as it's not even used for exchange, and has a ton of rehypothecation and elaborate derivative networks.
Gold's drawback was always its physicality. Arguably its heyday was before the invention of the telegraph, when at least the expectation was that money was going to be slow, and the only way to move it across most distances was physically, unless you had some handy Knights Templar or Hawala network handy.
That we still cling to it despite all of this is a good indicator of just how fucked up fiat is though. Thankfully, we have a better alternative network being built out.