This 50-year chart shows how cheap gold now is relative to stocks

After another drop on Tuesday, the gold price is now down 27% for the year and close to $700 an ounce below the metal's peak, struck in September 2011.

Gold is heading for its first down year since 2000, ending a spectacular 12-year bull run that took the price from $270 an ounce to where it is today.

The gold price's underperformance relative to the S&P 500 index which is up nearly 30% in value since the start of the year cannot be more startling.

But on a much longer term trend, the divergence seems to indicate that gold has been heavily oversold in 2013, falling well below its fair value.

As the graphs show gold's spike in 1980 to $850 an ounce – in inflation-adjusted terms still the all-time high – saw it lose touch with stock values (and some would say reality) entirely.

The downward trend back to the norm took a good decade, but at the start of the bull market in gold it is clear from the chart that gold was deeply undervalued for the better part of the 2000s.

The chart also shows that even with gold bugs at their most exuberant – when gold hit a record around $1,900 an ounce in 2011 – those levels did not constitute a wild deviation from the norm.

Gold first dropped through its long-term average around Christmas last year. Gold was trading around $1,650 in December 2012.

To return to its historically fair price, gold will have to climb by $400 an ounce. Either that or stocks could be in for beating.

This 50-year chart shows how cheap gold now is relative to stocks