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S&P 500 index to gold ratio: What does it mean and where might it go?

By Piero Cingari

10:44, 22 September 2022

a chart showing two lines on a stock chart of the S&P 500 and gold
Financial Graph,S&P 500 and Gold – Photo: Shutterstock

The S&P 500-to-gold ratio indicates how many ounces of gold are required to purchase the S&P 500 index (US 500) at any given time and it’s an extremely important market indicator. It measures the relative strength of the US stock market versus the price of gold.

For example, an S&P 500/gold ratio of 2 means that the S&P 500 index trades at twice the price of gold. When the ratio is below 1, the price of the S&P 500 index is lower than the price of an ounce of gold.

In essence, the S&P 500 to gold ratio serves as an important barometer for assessing risk appetite on financial markets.

The higher the ratio, the more valuable US equities are relative to gold prices. When the ratio goes up, it indicates that investors are becoming more confident in taking on higher risk, as they are opting to purchase stocks rather than placing their cash into a non-yielding asset like gold.

On the other hand, a declining ratio between the S&P 500 and gold is a sign that economic troubles are arising, and investors flee riskier assets like equities and flock into safe havens like gold.

Trading-wise, this ratio represents a "long S&P 500/short gold” strategy.

What does history tell us, and where is the S&P 500/gold ratio headed next?

S&P 500-gold ratio historical performance: The big picture 

a chart showing the S&P 500/gold ratio long term pictureS&P 500/gold ratio monthly chart since 1971 – Photo:, Source: Tradingview

Looking back over the last 50 years, the relationship between the index of the 500 most capitalized US stocks and gold has seen spikes followed by severe falls.

The S&P 500-gold ratio fell from 2.40 to 0.17 between the end of Bretton Woods in August 1971 and January 1980.

Those who had invested in the S&P 500 index while shorting gold in the 1970s would have lost 93% of their money.

The inverse strategy (long gold/short S&500) would have produced a return of 1.685% between August 1971 and January 1990.

As a result, the 1970s were an extremely negative period for equities and an extraordinarily positive period for gold, as stagflation (low growth and high inflation) killed stocks and elected gold as the best safe-haven asset.

During the 1990s, the tide dramatically shifted in favour of stocks and the S&P 500.

The ratio of the S&P 500 to gold went above 1 in the summer of 1990 and reached 5.50 in August of 2000.

Between 1990 and the summer of 2000, a "long S&P 500/short gold" strategy would have made a 450% profit.

During this decade, but especially in the last few years at the turn of the century, the US stock market has been shaped by the dot-com bubble, which caused unprecedented gains in the S&P 500 and Nasdaq indices.


18,689.60 Price
-1.000% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 21:00 (UTC)
Spread 1.8


18,451.30 Price
-1.160% 1D Chg, %
Long position overnight fee -0.0221%
Short position overnight fee -0.0001%
Overnight fee time 21:00 (UTC)
Spread 8.0


5,256.80 Price
-0.950% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 21:00 (UTC)
Spread 0.8


38,180.20 Price
-1.690% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 21:00 (UTC)
Spread 2.2

When the bubble burst in the second half of 2000, the ratio of the S&P 500 to gold plummeted.

The onset of the financial crisis in 2007 exacerbated the decline of the S&P 500 to gold ratio, which reached a low of 0.66 in July 2011.

The Federal Reserve's adoption of extremely accommodative monetary policies has given investors new incentives to take on the risk of US stocks. As a result, the ratio of the S&P 500 to gold has risen by 300%, from 0.66 to 2.67, between July 2011 and January 2022.

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S&P 500-gold ratio: More downside to come in the near term?

a chart showing the S&P 500/gold ratio short term pictureS&P 500/gold ratio daily chart as of September 22, 2022 – Photo:, Source: Tradingview

The ratio of the S&P 500 to gold has begun a downward trend in 2022, as the stock market's decline outpaced that of gold.

The ratio, which peaked at 2.66 at the beginning of the year, is currently trading at 2.27 as of this writing.

Technically speaking, the S&P 500's relationship to gold appears to have formed a falling wedge pattern, which may portend the continuation of a downward trend in the months to come.

But why might it be case? 

The latest Federal Reserve's economic projections portray a bleak picture for the US economy next year, with falling growth, rising unemployment, higher interest rates and sticky inflation. Growth is expected to remain well below potential, while interest rates are seen to rise to 4.6% in 2023. US companies will face severe downside pressure on their profit margins as a result of the latest Fed's economic outlook.

If this scenario plays out, it will be particularly bad for the stock market while boosting the appeal of gold amid rising economic uncertainties.

A sharp slowdown of the US economy, or a so-called “hard landing”, could cause the S&P 500 to gold ratio to fall further from here.

When looking at the S&P 500-to-gold ratio daily chart, the nearest support is located at 2 level mark (June lows), which is 13% lower than current levels.

If the S&P-gold ratio fell below 2 and then 1.90 (the lows for November 2020), it would then look at the support line of the falling wedge, which points to 1.83 by the end of 2022, representing a 20% drop from current levels.

Federal Reserve's economic projections: Hard landing in sight? 

Variable2022202320242025Longer run

Change in real GDP
June projection1.71.71.9 1.8

Unemployment rate
June projection3.73.94.1 4

PCE inflation
June projection5.22.62.2 2

Core PCE inflation 
June projection4.32.72.3  

Federal funds rate

June projection 2.5



Markets in this article

2339.26 USD
-22.56 -0.960%
US 500
5256.8 USD
-50.5 -0.950%

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