The GOLD-to-GLOBAL-WEALTH ratio is getting stretched and will require un-anchoring inflation or a financial crisis to go much higher...
The chart powerfully illustrates that in the post-Bretton Woods 'fiat' monetary era, gold has simply tracked the nominal dollar value of global wealth.
Gold has tracked global nominal wealth because, in a fiat monetary system, buying gold is just the 'insurance premium' that we pay to insure that wealth against monetary debasement, banking systemic failure, or outright state expropriation. And the insurance premium must broadly track the value of the wealth we want to insure.
As the chart shows though, the gold-to-global-wealth ratio spikes when the risks we are insuring against become elevated (because the 'insurance premium rate' to insure every dollar of wealth spikes).
In this regard, note that the only more stretched ratios than now happened after the runaway inflation of the 1970s, the GFC in 2008, and the euro crisis in 2011-12.
So, if the Trump 2.0 policies result in US inflation un-anchoring, or in a financial crisis, then the ratio can go even higher from its already stretched level.
Longer-term though, starting from this level of the gold-to-global-wealth ratio, I would expect stocks to outperform gold by a significant margin.
