Transcription
Gold prices are breaking brand new record highs while the stock market is falling. Now I know what you're going to say. Despite what are you talking about? The stock market is also breaking brand new record highs. Well, the stock market is measured against a currency. So when you log into your brokerage and it says that the stock market is up by 16%, it means that the stock market is up by 16% when you are measuring it with the United States dollar. But what happens if the measuring stick is broken?
Because if we take a look at the last five years, the stock market, more specifically the S&P 500, is up by 88%. Gold prices over the last 5 years are up by 180%. About twice as much. That means your stocks can buy less gold today than they could 5 years ago. You lost purchasing power with your stocks. And this is where people are starting to get concerned. And let me explain what's going on by going one step deeper by explaining the S&P 500 to gold ratio.
Because if we go back in time to the year 2000, back then it took 45 ounces of gold to buy one piece of the S&P 500. Today, in the year 2026, it takes 1.4 ounces of gold to buy one piece of the S&P 500. That means 26 years ago, stocks were very expensive. Gold was cheap. You needed a lot of gold to buy stocks 26 years ago. Today, it's the opposite. Gold prices have been crushing it. The stock market is getting cheaper relative to gold. And this is where people are getting concerned about the dollar. They're getting concerned about the economy. And they're getting concerned about the stock market.
So, let me break this all down because when gold prices are surging relative to stocks, what that means is that A, the dollar is losing purchasing power faster than B, corporations can grow their earnings because when you go to the stock market and you buy a share of Amazon, Tesla, Nvidia, doesn't matter. What you're doing is you want to buy a piece of ownership of those companies because you believe the these companies are going to be worth more money in the future and that they're going to continue to grow and innovate and do all that other stuff. Well, these companies have grown in value over the last number of years when you compare it to the dollar, but compared to gold, the stock market in general hasn't kept up.
Now, why are we comparing it to gold? Because gold is a universal currency. The dollar is the world's reserve currency, but it's a fiat currency. That means that it's just a piece of paper. It used to be backed by physical gold. But on August 15th, 1971, then President Richard Nixon took the dollar off of the gold standard, which meant that our central bank, the Federal Reserve Bank, could print an unlimited amount of money with the push of a button. So now the Federal Reserve Bank can print more dollars. And that boosted the economy, that boosted the stock market, but it came with a consequence. And the consequence is inflation and the weakening of the dollar.
Well, here we are today and we're really starting to feel the impact of that because we're aggressively printing money today. We're aggressively spending money that we don't have today. And inflation is still a problem. And now people are getting concerned about the dollar. That's why more people are starting to buy gold because when you buy a share of Amazon, you believe the Amazon is going to make bigger profits in the future. You believe the Amazon is going to have more economic utility in the future. When you buy a share of McDonald's, you believe that McDonald's is going to expand and grow in the future. When you buy a piece of gold, you don't believe that gold is going to have more economic value in the future. You buy gold because you are worried about the dollar losing value. And that's the difference. And so when people are buying gold, it's because of protection and insurance and hedging against the dollar losing value more than it is gold increasing in value in the future. So people buy gold out of worries about the dollar. They buy stocks when they believe in the future of a company. And what we've been seeing is that corporate earnings in general, not all of them, but in general, haven't been growing fast enough relative to gold prices. And this has been changing a lot of investment opportunities.
And that's why, again, I put together a brand new free investing master class where I walk you through how you can get started as an investor and find hidden investment opportunities before everybody else. I'll show you the exact framework that my firm and I use to research investment opportunities before they hit the headlines. It's a free master class. When you register, you're also going to get access to market briefs, which is my newsletter for investors. So, if you haven't registered for my investing master class and market briefs yet, I have the link for you down in the description below.
But what we're seeing right now is gold prices not only are growing faster than stocks, but the rate at which gold prices are growing is continuing to accelerate. And this is where some people have concerns about what might be coming, especially when it comes to building their portfolios and the value of the dollar. Now, we know President Trump has talked about the value of having a weaker dollar. Now, it might sound weird to have a weaker dollar, but let me read you directly from what President Trump said. Quote, "You make a heck of a lot more money with a weaker dollar. You don't do any tourism. You don't sell tractors. You can't sell trucks. You can't sell anything when the dollar is strong." So, President Trump has talked about the value of a strong dollar from an economic perspective because when you have a weak dollar, it is easier and cheaper from foreign countries to buy stuff in the United States. That weaker dollar generally also benefits stock prices. That weaker dollar also generally benefits gold prices. But that weaker dollar generally hurts consumers because when you are a consumer and you have a weaker dollar, that means you have to pay more dollars to buy stuff, especially if it's coming from a foreign country. Because now if you take that dollar that's weaker and you go to Canada, you go to Europe and you need more dollars to buy stuff because the dollar is weaker relative to the currency. Well, now you have to have more dollars to be able to afford those things. Everything is relative. This stock market is relative. The value of the dollar is relative. The value of gold is relative.
And that's why now people are watching the prices of gold because gold prices are growing so fast relative to the United States dollar relative to the stock market. And what many people are saying now is that because gold prices are growing faster than stocks, this is signaling a problem. Why? Because if we take a look at the last 100 years, there's only been a few instances where gold prices grew faster than stocks. Number one, it was in the early 1930s. That was when the Great Depression happened. Number two, it was in the early 1970s when we saw the great inflation, the great stagflation, when prices of things were going up and incomes were going down. It created a big mess in our economy. Number three was during the 2000.com bubble bursting. Number four was during the 2008 great financial crisis when the housing market collapsed. And number five was the 2020 pandemic. And now we're seeing it happen again. So in the past, at least in the last 100 years, when we saw gold prices outpace the stock market, it was timed in a way. It happened during the same time where some other bad economic event happened.
And right now there's a few reasons why we're seeing gold prices really boom because I want to make sure that this is clear. The price of an asset, I don't care if we're talking about gold, real estate, stocks, everything depends on supply and demand. When you have more buyers and sellers, the price of an asset goes up. When you have more sellers than buyers, the price of that asset goes down. And there are three main contributors right now to people buying more gold.
Number one is central banks. We are seeing more and more countries around the world wanting to do what's called dedollarization. Separating themselves from the dollar, wanting to strengthen their own currencies to separate from the dollar. And because of that, we are seeing many countries around the world accelerate their purchases of more physical gold. China has aggressively been purchasing more gold. Poland has been buying more gold. Turkey has been buying more gold. These are central banks that are spending a lot of their currencies monies buying more of this gold which is contributing to more buyers in the gold market.
Number two are sovereign wealth funds. More and more sovereign wealth funds are allocating a bigger percentage of their fund into gold. These sovereign wealth funds are organizations funded a lot of times by governments that spend money or invest money into a way to grow the wealth of a country. So think of it like your personal investment account but for a government. That way the government can grow their wealth and then enrich their citizens. That's what a sovereign wealth fund is. So previously these sovereign wealth funds would invest in startups. They would invest in private companies. have invest in stocks and other things to grow their country and then as they make bigger profits then they can distribute this money back into their country in whatever way that they wanted to do. Well, what we're seeing is over the last couple of years more of these sovereign wealth funds have been allocating a bigger percentage of their wealth into physical gold and just the general popularity of billionaires talking about buying more gold. Ray Dalio has been a big advocate of this about the importance of buying gold through all these shifts happening right now. And this is where we're seeing a big run up in the prices of gold.
Now, a couple things that I want you to be aware of because there's a a two-sided argument to everything. Obviously, yes, there's concern about the dollar, there's concerns about inflation, there's concerns about the economy, but we've seen gold prices go through a lot of movements in the past as well. During the 2008 crash, we saw a lot of money printing happen. It was quantitative easing. People were worried about hyperinflation, the dollar losing value. And during that period between 2008 and 2012 when we had all the money printing happening, gold prices were booming. The stock market was crashing. Gold prices were going up. But then in 2012 when the recession had eased, it became clear the hyperinflation was not happening. And when those worries about the dollar went away, gold prices crashed and they stayed down in 2012 to 2013 to 2014, 2015, 2016, 2017, 2018, 2019. And it wasn't until 2020 that gold prices started reaching those same levels again. and breaking new record highs 2020. Now what happened in 2020? We all know the pandemic hit, money printer opened and that was when all that new concerns about inflation started again. Gold prices boomed and they've been booming ever since 2020 because of those concerns. I mean between 2020 to now between the stock market go up by 88% while gold prices have boomed by 180%. which means you can stimulate an economy with all these dollars, but that really doesn't mean that somebody else is going to become more wealthy. And this goes back to the point that I was making a lot during the pandemic. And if you've been watching my videos, you've heard me say this before. One of the most expensive kinds of money is free money. And the reason why is you can print as many dollars as you want, but you can't just print more wealth. And that's what we're really starting to see the effect of is that between 2020 to now, we were trying to print more wealth, but you can't do that. You could print dollars and then those dollars go into the economy, but in reality, they just weaken everybody else's dollar. And the people that become wealthy are the financially savvy.
So, what does this mean for you? Well, obviously, I'm not a financial adviser. I'm just a random guy on YouTube. I can't tell you what to do. Investing has risks. You're never guaranteed to make money when you invest. In fact, you will lose money at some point. So, make sure you always do your own due diligence and never blindly trust a random guy on YouTube.
So, what does this mean? Well, if you are investing your money, this is the importance of having real diversification. Doesn't mean you need to go and dump all your money to gold, but it means you should have real diversification in general. In general, the media likes to hype things up. Things are never generally as bad as people like to make them seem and things are generally never as good as the media likes to make it seem as somewhere in the middle. And the mistake that a lot of people make is they start chasing assets after they've had huge run-ups because they now they think that oh because something has gone up by 200% it's going to go up by another 200% in the same time period and maybe it will but in general chasing is never a good opportunity. You want to understand the why behind your investments. And so when I say that what I'm trying to say is not that you shouldn't buy gold. I was talking about buying gold in 2019 and 2020, but what I'm talking about is having real diversification in your portfolio. Because for a lot of people, real diversification means investing in different types of stocks. I invested my money into growth stocks and AI stocks and blue chip stocks and dividend stocks and some foreign stocks and now I'm diversified. But that's not real diversification. Real diversification is owning different asset classes. And this real diversification now in 2026 and going forward is going to become more and more important because we're going to see more money printing are probably going to see lower interest rates in 2026 and all these things that can create more inflation. Well, they're going to change the economy and everybody has the prediction as to what is going to win. Personally, I don't know. I don't try to predict what is going to win. Instead, what I try to do is I want to be wherever could win. So, owning stocks, paper assets, owning real estate, hard assets that produce cash flow, owning some physical gold, owning some speculative assets like crypto. This is now how you're starting to build a more diversified portfolio because now you have different asset classes and in different phases of the economy, certain assets are going to win. In 2022, stock prices crashed, crypto prices crashed, real estate boomed. 2020, the stock market fell by 30% before it ended up rallying again. Real estate did fine. 2008, the stock market crashed. Real estate went down. Gold prices went up. 2009, the stock market starts to go back up, but real estate's still going down. 2010, stocks going up, real estate's going down. And this is where when you have that type of diversification, you can weather different types of storms because we're going to see many different types of storms. We're seeing more volatility now than really ever before, but it creates opportunity. And this is where when you have the right financial education, obviously you can have the money to invest, but having a diversified portfolio is what you really need when you think about how you can build wealth and take advantage of whatever opportunities come your way. Because when we see a crash, whether it's in gold or stocks or real estate or crypto, you have the ability to go in and capitalize on that opportunity.
So, lot of craziness happening, things you want to pay attention to. Hopefully, you got value out of this video. If you did, the best thank you was a referral. So, if you could please share this video with a friend, family member, colleague, or fellow investor. That way, we can continue to spread this type of financial education.