How much gold does the stock market cost?

Two weeks ago, I went through 155 years of the stock market, in dollars and in gold, directly in the charts. I received a lot of positive feedback, but also heard from many people who found it too detailed and struggled to follow. So here is the same comparison again, zoomed out and brought together in simpler pictures.

This is about the S&P 500, the 500 largest companies in the US. I think it is the best index for measuring the stock market over long periods, and researchers have reconstructed it all the way back to the nineteenth century. This time I start in 1925, between the world wars, when countries were trying to return to gold after the First World War.

Before we begin: I am not saying that shares or the stock market are bad. I am building a company myself, and the stock market is an excellent way to build and own companies. What I want to offer is a perspective I think many people miss. What you see depends on what you measure with, and gold can be an alternative for preserving value over time.

We are measuring the stock market. Gold is the ruler.

We are used to measuring the stock market in a currency. The S&P 500 is measured in dollars, and here in Sweden we measure in kronor. But you can also ask how much gold you get for one unit of the index. Or, put another way: what would it have looked like if I had held gold instead of being invested in the 500 largest companies in the US?

The price in gold is the S&P 500 divided by the gold price in dollars per ounce. An ounce is 31.1 grams, and since grams are easier to grasp, I show both. When I say the stock market fell 50 % measured in gold, it means one unit of the S&P 500 buys half as much gold at the bottom as at the peak.

The ruler itself has had three settings. Until 1933, an ounce of gold was 20.67 dollars. That was not a price, it was the definition of a dollar. In 1934, the government decided the same ounce was 35 dollars, and it stayed fixed there until 1971. Since then, the price has floated.

Between 1934 and 1971, measuring in gold therefore effectively measures only the dollar. A yardstick someone holds fixed measures nothing.

Since 1971, everything has grown when measured in dollars

On 15 August 1971, President Nixon ended the ability of other countries’ central banks to exchange dollars for gold. From that day, the dollar was tied to nothing. Gold continued to be valued for what it is, a limited asset that many trust to hold its value. Meanwhile, the US kept increasing the quantity of dollars, and eventually a limited asset could no longer be held together with a currency that only grows.

Looking at the gold price after 1971, it is hard to reach any other conclusion than that something has happened to the dollar. The money supply has grown 37-fold, consumer prices 8.5-fold, the S&P 500 84-fold and gold 113-fold. When there are so many more dollars, everything scarce rises when measured in dollars. Shares too.

Measured in gold, one unit of the S&P 500 has instead lost 26 % since 1971, counting price only. With dividends, it has more than tripled even in gold, and that needs to be said.

Four phases, in dollars and in gold

When I put 155 years of the stock market side by side in the previous analysis, I saw the same four phases returning again and again. First, the market moves sideways, often for many years. Then it breaks out and trends. At the end of the trend comes a bubble, where the rise is faster than during the entire preceding period. Then comes a major correction, and afterwards the phases begin again.

Plotting the phases on the S&P 500 in dollars since 1971, it starts with a major correction shortly after 1971, the oil crisis. Then the market moves sideways until 1982, trends, and has a fairly small correction in the 1987 crash. Then the same thing again: consolidation, trend and the dot-com bubble.

Next comes a strange phase with a double crash, 2000–2002 and 2007–2009, without the index rising much higher in between. Since 2009 there has been a long trend, with covid becoming only a brief dip. Every major peak has been higher than the previous one, and every decline since 1971 has been recovered, taking at most seven and a half years.

Many argue that there have been no really big crashes since the 2008 financial crisis, just one long rise. In dollars, that is true. But measured in gold, the same period begins with an enormous crash. From 1971 to 1980, stocks fell 93 % measured in gold, from 2.60 to 0.17 ounces, lasting almost ten years. Had you held gold instead, you could have bought more and more of the stock market throughout that period.

Then consolidation, a trend, a smaller crash in 1987, a long trend and the dot-com bubble. But what looked like two crashes in dollars, 2000 and 2008, was one long eleven-year crash measured in gold: from 5.47 to 0.67 ounces, −88 %. After a new trend in 2012–2021 came another correction, from 2.61 to 1.30 ounces by February this year, and stocks remain below their 2021 peak.

Two things are worth noticing. Every major bottom has so far been higher than the last: 5 grams of gold in 1980, 21 grams in 2011 and 41 grams in February this year. And the 2021 peak was only half the peak in 2000.

This is how the stock market worked before 1971, when the dollar was tied to gold. And this is how I think we should view the stock market today too.

The same stock market, two completely different pictures

Here is the whole point in one picture. At the top, the S&P 500 in dollars: a staircase rising 605-fold since 1925. Below, exactly the same index measured in gold: no trend at all, just large waves.

Measured in gold, stocks have not even returned to their 1999 level. One unit of the S&P 500 today buys 64 % less gold than at year-end 1999/2000. It buys roughly as much as in the early 1960s, before gold was released from the dollar.

You can make of that what you will, but it gives a completely different picture from the one we usually see of how stocks perform.

From 7 to 161 grams of gold

In 1928, the stock market cost 37 grams of gold. At the bottom in 1932 it cost 10 grams, and in 1967 almost 90 grams. Then, in 1979, only 7.4 grams. That is less than at any year-end since 1925, even during the Depression. Twenty years later, in 1999, the same index cost 161 grams, 22 times as much.

The peaks in 1928, 1967 and 1999 grew higher and higher. But since 1999, stocks have not done better than gold. The 2021 peak, 83 grams, reached neither 1967 nor 1999. Today one unit costs 58 grams.

No one wins forever

If you look only at who wins, stocks or gold, you see a pendulum. Between 1932 and 1967, stocks were 8.2 times better than gold. But gold was fixed against the dollar then, so we are effectively measuring only the dollar. Since 1967, the winner has changed every ten to twenty years.

Gold won 11.6-fold in 1967–1979. Stocks won 22-fold in 1979–1999, and I say that openly. Then gold again until 2011, stocks again until 2021, and since 2021 we have been in a gold phase.

When the government took the gold

During the Depression in the 1930s, many countries ran into problems with their currencies and economies. Britain and Sweden left the gold standard in 1931 and let their currencies float freely. That was precisely what the US later did in 1971.

The US chose a different path. In April 1933, all private individuals were forced to hand their gold to the government at the fixed price of 20.67 dollars per ounce. Anyone who did not comply risked heavy fines. Nine months after the final surrender date, on 31 January 1934, the government decided the same ounce was worth 35 dollars.

The same crisis, two depths

As long as the dollar was tied to gold, the two measures gave the same answer: 1937, 1962 and 1966 have the same figure in dollars and in gold. After 15 August 1971, they diverge. The 1973–1974 oil crisis was −48 % in dollars but −78 % in gold. And it goes both ways: in 1980–1982 stocks fell in dollars but rose in gold, because gold fell even more. Gold is a moving yardstick too.

Starting with the worst crashes measured in dollars, the 1930s top the list, the one still called the worst crash of all time: −86 % in three years. Second is the 2007–2009 financial crisis at −57 %. All 17 crashes of at least 20 % since 1928 have returned to new records in dollars.

Measured in gold, the list looks completely different. The largest is not the Depression but 1967–1974, when stocks fell 87.6 % measured in gold but only 31 % in dollars. Second is the dot-com bubble and financial crisis, 1999–2009: −87 % measured in gold against −52 % in dollars.

Third is 1976–1980. In dollars, stocks rose 7 %, but measured in gold they fell 87 %, because the gold price rose so much. That crash was not even visible, because it was measured as a rise in dollars. Can we call it a crash? I think this is one of the most interesting questions in the entire analysis. And in 2022–2026, the years after Russia’s currency reserves were frozen, stocks rose 42 % in dollars but fell 52 % in gold.

The reason the 1971–1980 decline is one fall in figure 6 but two here is the rule I use: a crash is considered over when stocks have risen 50 % from the bottom, and that happened measured in gold between 1974 and 1976.

Then there is the time it takes to get back to the peak. In dollars, it has become faster and faster: 25 years after 1929, 5.5 years after the financial crisis and half a year after covid. Measured in gold, it took 29 years after 1929 and 30 years after 1967. The July 1999 peak has still not been reached. 27 years later, stocks are 66 % below it.

Only when rates fell did stocks clearly beat gold

Dividing history according to how interest rates moved reveals something interesting. In dollars, stocks have risen faster in every period. Measured in gold, they have delivered negative returns in three of four periods. During those periods, it would have been better to own gold than to have money in stocks.

The exception is 1981–2020, when rates fell for almost 40 years. Then stocks beat gold by 5 % per year. I say that openly, because it is part of the truth. But notice what happened when rates turned upwards in 2020. In dollars, stocks have never risen faster. Measured in gold, they have fallen.

The figures are calculated using annual data and differ slightly from analysis 4, where I measured directly in the charts using different start and end points.

The same cycles, only faster

Measuring bitcoin in gold reveals the same cycles as in the S&P 500: trend, bubble, correction and consolidation, again and again. The difference is that the cycles move much faster. I think this is because bitcoin is a much younger asset. It has existed for almost 18 years.

Four cycles in fourteen years, with peaks in 2013, 2017, 2021 and around year-end 2024/25. Every bottom has been higher than the last, from 5 grams of gold per bitcoin in 2015 to almost 400 grams in February this year. But the peaks are flattening: 34 ounces in 2021 and 37 in 2025. Declines have become smaller with each cycle, and rises too.

Now put stocks and bitcoin side by side, both measured in gold. From 2012 to 2021, when stocks rose against gold, bitcoin rose even more. Since December 2021, when stocks have fallen against gold, bitcoin has fallen by roughly the same amount.

Bitcoin has followed stocks, not gold. I think that is the biggest reason bitcoin has not done particularly well in recent years: its price has moved more with stocks than with gold.

The uncomfortable part: today one bitcoin costs 20 ounces of gold, just over 600 grams. That is less than half the peak.

Two truths about the same stock market

Shares are ownership with risk, and you should be paid for that risk. You have been, even measured in gold, if you include dividends. The question is whether the reward has been worth the risk, and everyone must judge that for themselves.

But I do not think you should have to take risk to save your money. Money should be a way to save your time, energy and focus so you can use them in the future. That is the purpose of money. It should also be possible to pay with it, and both things should be true. For the past fifty to a hundred years, we have mostly lived with the second truth: money is what we pay with, and then everyone has to do something with their money for it to retain its value.

I would argue that it is the other way round. Something becomes money because people trust it to hold its value over time. That is why it then becomes a means of payment, not the reverse.

We are not there today; we are closer to the opposite. Most people have never been so active with their investments, because it has become accepted that money which is not invested loses value. I think that is a sad development. If money itself held its value, you would not have to become an investor just to stand still. My assessment is that we may be moving towards a world where money can be money again.

Please write what you see in the numbers, and challenge me.