The S&P500 in terms of Gold

Stock prices, and therefore stock market indices, are almost always quoted in terms of nominal dollars. When the purchasing power of the Dollar is undergoing large changes, as it has done during various periods in the past, these indices can paint a misleading picture. For example, the Dow Jones Industrial Average was essentially flat between 1966 and 1982 (it actually oscillated in a wide range but did not decisively exceed its 1966 high until the second half of 1982). However, this was a period during which the purchasing power of the Dollar collapsed which meant that the Dow lost more than 70% of its value in real (inflation adjusted) terms. One way of gauging the real performance of the stock market over time is to construct charts using constant (inflation adjusted) dollars. Another way is to express the value of the major stock indices in terms of some other constant, such as gold. Here is a chart showing the S&P500 in terms of gold.