Equity Multiple Contraction Underscores Gold's Value as a Reciprocal Asset

St. LOUIS (ResourceInvestor.com) --The S&P 500 Index was the winning hand relative to gold from May 1980 to August 2000. After January 1995 the S&P 500 went on a parabolic tear eventually achieving a bullion busting 5.5 times the value of one ounce of gold. Since then it has been a replay of the 1966-1975 inversion that has seen gold reassert its role as a handy reciprocal asset in any portfolio.

For the first time since 1991 the S&P 500 index is on the verge of equalling the price of one ounce of gold. That's a long time to wait for the reversion, but don't lose sight of the fact that it took almost two decades until 1980 before the S&P 500 started to win back lost ground against gold.

A little gold goes a long way in any financial crisis, most especially a credit blow-up. And, eventually, quality gold equities (sustained postive cash flow, 9-10 year mine life with perpetual reserve replenishment, pays dividends) will break out of the general downdraft.

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