Bloomberg News

Stock Drop Against Gold ‘Very Much Due’ to End: Chart of the Day

February 01, 2012

(GRAPHIC: COD_STOCKS_VS_GOLD_020112. CHART OF THE DAY. Size: 3C X 4in. (146.0 mm X 101.6 mm) Expected by 15:00.)

Feb. 1 (Bloomberg) -- U.S. stocks “hold out more promise than gold” because the precious metal has surged for more than a decade, according to Tobias Levkovich, Citigroup Inc.’s chief U.S. equity strategist.

The CHART OF THE DAY shows the ratio between the Standard & Poor’s 500 Index and the price of gold for immediate delivery since 1928, when calculations for the index begin. The red line depicts the direction for the past eight decades, and the gray lines indicate when the ratio has been unusually high or low.

Levkovich drew his conclusion in a Jan. 27 report from a similar chart, going back 125 years. The ratio fell to a low of 0.59 last year from a high of 5.55 in 2000, when gold started an 11-year run of annual gains, and was about 0.75 yesterday.

“Investors hiding out in gold have made a lot of money in the past decade,” he wrote. Even so, the ratio has fallen far enough out of line with the historical trend to show “that a shift back toward equities is very much due.”

Since gold’s streak started in 2001, the price has risen more than sixfold. The S&P 500 is down 0.6 percent since the end of 2000.

Gold is benefiting from concern that the dollar may lose value, Levkovich wrote. The Dollar Index, a gauge of the U.S. currency’s value against the currencies of six major trading partners, has lost 28 percent since the beginning of 2001.

--Editors: Joanna Ossinger, Stephen Kleege

-0- Feb/01/2012 18:57 GMT

To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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