TL;DR
When measured in gold rather than dollars, the S&P 500 has fallen substantially since its 1999 peak and remains far below its 2008 highs. Long-run data to 2012Q1 show average and median index levels in grams of gold, and a gold‑deflated PE10 that sits well below historical averages.
What happened
Analysts who price the S&P 500 in terms of gold find a markedly different picture from the dollar‑denominated narrative. The index peaked around 1999 at roughly 168 grams of gold and later dropped to the 20–25 gram range, a decline on the order of 85%. Although dollar prices rebounded after the 2009 low, the index priced in gold stayed roughly flat from 2009 until mid‑2011, then fell further before a modest recovery that left 2011 about 9.4% above the 2009 low but down on the year. By Q1 2012 the index had risen roughly 6% from the 2009 low (about 16% above that low) yet remained about half the 2008 gold‑priced peak. Long‑run figures from 1880 to 2012Q1 show an average S&P level of 29.4 grams and a median of 14.8 grams. Using Shiller’s 10‑year PE deflated by gold rather than CPI produces a historic average near 16.5; the gold‑deflated PE10 was about 9.2 in March 2012, well below its long‑run mean.
Why it matters
- Pricing equities in gold can change the interpretation of market recoveries by removing currency effects tied to monetary expansion.
- A lower gold‑deflated PE10 suggests valuations may be cheaper when measured against a stable commodity standard versus nominal dollars.
- Long-run gold‑priced series reveal past eras when the market traded at very low gold valuations, implying extended periods of weak real returns are historically possible.
- Investors focused solely on dollar returns may underappreciate declines in purchasing power relative to precious metals.
Key facts
- S&P 500 peak in gold: about 168 grams (around 1999).
- Post‑peak decline to roughly 20–25 grams represents about an 85% fall from that high.
- From March 2009 to July 2011 the S&P priced in gold remained largely flat; it then fell to ~15% below 2009 lows before recovering.
- End of 2011: S&P in gold was ~9.4% above the 2009 low but down 10.4% for the year.
- Q1 2012: index rose ~6%, putting it ~16% above the 2009 low but about 50% below the 2008 gold‑priced high.
- Long sample (1880–2012Q1) average S&P level = 29.4 grams; median = 14.8 grams.
- Gold‑deflated Shiller PE10 long‑run average = 16.5; median = 15. As of March 2012 the PE10 measured in gold = 9.2.
- Historical episodes when the gold‑priced market stayed below 10 grams include 1932–1943 and 1979–1982; the index first rose above 10 grams around 1900.
What to watch next
- Whether the S&P returns to sub‑10 grams as it has in prior multi‑year episodes (not confirmed in the source).
- Movements in the gold price relative to the dollar, which will directly affect the S&P when priced in gold (not confirmed in the source).
- The trajectory of the gold‑deflated PE10 — whether it moves toward the long‑run average of ~16.5 or stays near low levels (not confirmed in the source).
Quick glossary
- Pricing in gold: Expressing the value of an asset in units of gold rather than in a fiat currency, to remove currency purchasing‑power changes.
- Shiller PE10 (CAPE): A price/earnings metric that divides current price by the average of inflation‑adjusted earnings over the past 10 years to smooth cyclical effects.
- Quantitative easing: A central bank policy of large‑scale asset purchases intended to inject liquidity into the financial system.
- Median vs. average: Median is the middle value in a dataset; average (mean) is the sum of values divided by their count. Both summarize central tendency but respond differently to extremes.
Reader FAQ
Does pricing the S&P 500 in gold mean stocks are worthless?
Not confirmed in the source.
Is the recent dollar‑denominated rally an illusion?
The source argues that much of the dollar rally reflects currency depreciation versus gold, but it does not claim that all dollar gains are illusory.
How does the gold‑deflated PE10 compare to historical extremes?
As of March 2012 the gold‑deflated PE10 was about 9.2, nearer the historical low (2.1) than the high (66), while the long‑run average is 16.5.
Where does the underlying data come from?
The underlying S&P data are attributed to Robert Shiller and his work referenced in the source.
S&P 500 2 US Stocks reached their peak in 1999, and have clearly been in a bear market since 2001. From a high of 168 grams, they have fallen to…
Sources
Related posts
- 2026 study: Drinking water quality differs widely across U.S. airlines
- Coase’s Penguin: Linux, the Nature of the Firm and Open Collaboration
- Sabotaging Bitcoin: How Derivatives Could Enable Block-Reverting Attacks