The Gold Report
If the Dow Jones Index is expressed in the only currency that does not inflate over time, then the ongoing bear market is very clearly visible (with the rally of last year nothing more than that). How will this ratio proceed until it reverts to the bottom of one last seen in 1980?
Then the gold price was $850 an ounce and the Dow index highly depressed during the last big U.S. recession. Looking at this chart and extrapolating forward then gold prices look to be going much higher, while the Dow Jones is in for another downturn.
Simply stated it can be noted that over time gold, oil and other commodities have a reverse correlation to stock and real estate markets. One is rising while the other is falling, and vice versa.
So to revert to the long-term low point of one on this index almost certainly requires a combination of gold heading much higher in price and the Dow taking a tumble. And is that not what the bearish noises on Wall Street and the bullish babble from gold bugs is telling us?
Are we not heading into a couple of years of near depression like 1980–1982 with stock market prices too high right now? Is gold not increasingly attractive to investors with bond prices looking very vulnerable in particular, once stocks have corrected?
Turn it the other way, and stocks would have to fall by almost 90% just to get to the current gold price, or the gold price would have to surge by a factor of 10 to meet the current Dow.
Interestingly none of these scenarios is negative for the gold price. You would need to see the Dow:Gold trend broken entirely for that to happen. Long-term trends in major asset classes are among the most reliable of indicators.
Given that the trend is your friend until it is not, then the Dow:Gold chart is a guide to serious investors about where to put your money for the next few years. Of course, this is a long-term trend, so a short-term setback for the gold price can still happen as the Dow first sinks, and might be expected as the dollar would rally strongly.
Notable Quotes
"GRG outlined ~110 Moz Ag eq at Chinchillas, and it has barely scratched the surface." (6/17/13) Golden Arrow Resources Corp. - The Gold Report Interview with Jay Taylor More >
"AVA's grades are around 1 g/t, with lots of exploration potential." (6/17/13) Aurvista Gold Corp. - The Gold Report Interview with Jay Taylor More >
"We saw insider buying in DGC, which has gone to the capital markets to raise money." (6/14/13) Detour Gold Corp. - The Gold Report Interview with Ted Dixon More >
"The potential for the court to award RPM either the LH claims outright or give it some substantial settlement make it a company to watch." (6/1/13) Rye Patch Gold Corp. - Brien Lundin, Gold Newsletter (Jefferson Financial) More >
"For a junior, CYD offers a lot to like, including a good share structure and money in the bank." (6/12/13) Cayden Resources Inc. - The Gold Report Interview with Brien Lundin More >
What Does the Dow:Gold Ratio Signal for Prices Ahead?
Source: GoldSeek, Peter Cooper (2/1/10)
". . .over time gold, oil and other commodities have a reverse correlation to stock and real estate markets."
More Experts
"GUY has a robust project, advanced permitting and manageable capital requirements in a mining friendly jurisdiction." (6/7/13) Guyana Goldfields Inc. - Brad Humphrey, Raymond James More >
"MND's higher grades and improving operating performance offer near-term production growth at reduced operating costs." (6/6/13) Mandalay Resources Corp. - Chris Thompson, Raymond James More >
"SSO is well positioned to be a consolidator of silver assets." (6/10/13) Silver Standard Resources Inc. - The Gold Report Interview with Keith Phillips More >
"NRE is into the heaviest and rarest of the rare earths; I'll almost surely buy after the metallurgical report is out." (6/4/13) Namibia Rare Earths Inc. - Thom Calandra, The Calandra Report More >
"BTO is a great mid-cap, higher-grade company that performs well." (6/7/13) B2Gold Corp. - The Gold Report Interview with Frank Holmes and Brian Hicks More >