S&P 500 Viewed as Better Than Gold After Slump: Chart

U.S. stocks are poised to extend a rally relative to gold that was interrupted at midyear when the precious metal’s price climbed, according to Tobias Levkovich, Citigroup Inc.’s chief U.S. equity strategist.

The CHART OF THE DAY tracks the ratio between the Standard & Poor’s 500 Index and the price of gold for immediate delivery since 1928, when index calculations begin. Levkovich based his analysis on a similar chart, starting from 1888, that he cited in a Sept. 13 report.

After reaching this year’s high on June 27, the ratio dropped 14 percent in the next two months. The S&P 500 peaked on Aug. 2 and ended the period with a gain of only 1.1 percent. Spot gold climbed 18 percent. The ratio then recovered most of the decline as share prices moved higher again and the metal’s price headed lower.

“Stocks still appear to be a much better investment alternative” than the metal, the New York-based strategist wrote. The S&P 500’s ratio to gold closed yesterday at 1.29, below a reading derived from past moves, as the chart shows.

Levkovich made his first 2014 year-end estimate for the S&P 500 in the report. Earnings, asset values, economic growth, consumer confidence and other criteria suggest the index will end the year at 1,900, he wrote.

The estimate is 12 percent higher than yesterday’s close and identical to previous calls by Andrew Garthwaite, a global strategist at Credit Suisse AG, and David Kostin, Goldman Sachs Group Inc.’s chief U.S. equity strategist.

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