The newsletter Growth Fund Guide had an interesting chart that charted
the ratio of the price of gold (in US dollars) to the S&P 500 Index.
Over the 20th century, this ratio has oscillated back and forth between
around 0.3 (when the stock market was highly overvalued relative to
gold) up to around 5 (when gold was highly overvalued relative to the
stock market). On the average, the price of gold has been around 1.3
times the S&P.
Right now the gold price is $400/ounce, about 0.4 times the S&P. If
this ratio rose back to its average, that would take gold to around
$1300 per ounce.
