Gold $3000: Never More Expensive or Valuable
Thursday, 3/27/2025 11:57
Inflation-adjusted gold price beats Jan 1980's peak...
HOW HIGH is too high for the price of gold, or its real value?
asks Adrian Ash at BullionVault.
First, let's ignore
everyone – and
there are
lots of them – claiming that gold is still under-valued simply because it hasn't yet matched the inflation-adjusted
gold price peak of 21st January 1980.
Inflation is a monthly data point, and gold that day – spiking to $850 per Troy ounce – topped that month's average price by 25%. Whereas on a month-average basis, gold this February was worth $100 more than its New Year 1980 level in real, inflation-adjusted purchasing power terms. That was even before it broke the $3000 per ounce level in March.
Gold, in other words, has never been more expensive, nor higher in real value.
But does anyone ever fret about that happening to, say, the stock market? Even though the cost of buying the S&P500 price index has more than doubled in real terms from its huge Tech Stock Top of 2000...?
As for the real gold price – adjusted in our chart above by the US Consumer Price Index – it's now $600 higher than Jan 1980 if we use the core PCE index instead (the Federal Reserve's preferred measure of inflation).
Or using headline PCE (which doesn't strip out such minor cost-of-living stuff as, umm, food and fuel) gold already broke Jan 1980's monthly high back in summer 2011, peak of gold's financial crisis bull market.
It's not just the Dollar gold price. Same goes for all other investors and savers in all other currencies, too. Not least here in the UK. With bells on.
The longest-surviving currency in the world, the Pound has never fallen so low in terms of gold bullion, and gold has never been worth more in real inflation-adjusted terms...
...not across 8 centuries of available purchasing power data.
Crunched here with a big dose of salt, today's value tops even the 15th Century's bullion famine in Europe and England's domestic catastrophe of the Wars of the Roses.
Again, was
gold in UK Pounds only a "buy" until it matched those late medieval highs? Is its new record peak a reason to sell?
If investors using BullionVault think so, it's only at the margin so far.
Net-net, users across the 175 countries we currently serve have liquidated 85 kilos since
gold on 14 March 2025 first crossed through $3000 per Troy ounce. And while
such profit-taking in gold might sound like a lot...
...banking close to $9 million in less than 2 weeks, in fact...
...it's barely a scratch on
how much gold investors continue to hold, at very low cost, insured inside secure each client's choice of London, New York, Singapore, Toronto or Zurich...
...now worth a record above $4.2 billion.
How come? Price in currency terms or real purchasing power is only one reason to invest in gold. Or so BullionVault users keep telling us.
This New Year, in
BullionVault's 2025 customer survey, just over 1-in-3 respondents (34.1%) named "Currency debasement + inflation" as their No.1 motive for investing in precious metals.
Very close behind yet again (this time on 30.1%) came "Diversification, to spread risk from shares, bonds, property etc." Which makes sense. Because as long-time readers of Gold News or BullionVault's
Weekly Update emails know with a yawn,
gold has repeatedly risen when the stock market sinks.
So, how over-excited is gold in terms of productive business assets today?
No doubt you've heard of
the Dow/Gold Ratio.
It aims to track the value of US corporate equities in terms of bullion. The ratio simply takes the current index level of the Dow Jones Industrial Average, and divides it by the current price of gold per Troy ounce.
The DJIA, however, is
a flawed index to say the least. So our chart above uses the S&P500 index instead, a
much broader (and far more robust) stock-market measure of US-listed companies.
In effect, this ratio chart shows you the price of buying corporate America in terms of the shiny but
mostly 'useless' precious metal. And our chart also shows you the price of gold in terms of the S&P500 as well...
...simply reversing the maths, and thereby presenting the same thing upside down...
...the better to see where stocks peaked and troughed in terms of gold, and vice versa.
Now, as you can see, gold peaked in terms of US stocks back in January 1980, with one ounce equal to a massive 6.1 of the S&P500 index on average that month (and spiking to 7.6 on Monday the 21st, history fans).
Stocks in terms of gold then peaked in July 1999 and again in August and September the following year...
...averaging 5.4 ounces with 1-day peaks to 5.6 and 5.5 ounces right around the S&P's cash-price top of the Tech Stock Bubble on 24 March 2000. (Happy 25th anniversary, by the way.)
Whereas today?
Gold right now equals only 0.5 of the S&P500 index...
...well above
gold's Millennial lows beneath 0.2...
...but pretty much bang in line with the past 10 years' average...
...and less than half its long-term average of 1.1 across the past 55 years since 1970.
No, none of these numbers mean much by themselves. You certainly can't (or shouldn't) try to trade them day-by-day as a signal for getting into stocks and out of gold, or vice versa.
Nor does our 3rd chart above mean that gold prices can't or won't tumble from here. $3000 is a big number. Gold got there in double-quick time. When it last crossed a 4-figure threshold,
gold took 2.5 years to finally stop falling back through it.
But in the big sweep?
Yes, fund managers and advisors who never tip gold are
suddenly paying attention. Yes, the metal is
making headline across the mainstream media. And yes, consumer demand is collapsing in the face of these new all-time highs, with
households across Asia choosing to sell and raise cash.
But those fund managers and advisors have barely begun allocating money to gold. The headlines come as Western investors remain flat net-net rather than rushing into a mania. And Asian demand – we think – is slowly transforming, edging away from bracelets and trinkets towards investment bullion as a store of wealth in the same way that Western household demand has been transformed so far this century.
More on that in next week's
Weekly Update email to BullionVault users. Events allowing.
Meantime, and like the ever-prescient Gary Tanashian says in his Notes from the Rabbit Hole, "Viewing the gold price in a vacuum,
some may think there is a bubble in gold. But that is far from the case" in terms of both the stock market and investor participation right now.
That said, one other thought for today.
Anyone tells you "Gold is being suppressed! Its price should be much higher!", ignore them. Or if you feel you must engage, show them the first 2 charts above...
...and remind them that
across the 21st Century so far, gold is the best-performing asset by far for any investor anywhere...
...reversing 5 centuries of lower real UK value in just 25 years.
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