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Interesting comparison - gold price vs. Dow 30

WingsruleWingsrule Posts: 3,009 ✭✭✭✭
in Precious Metals
A guy on Larry Kudlow's show just commented that the DJIA has hit a new low against gold...the Dow is only 8.5 ounces of gold.

Comments

  • HigashiyamaHigashiyama Posts: 2,192 ✭✭✭✭✭
    Over time, the Dow should tend to increase in terms of gold, since the Dow should very broadly track both real economic growth and inflation, and gold should track inflation.
    Higashiyama
  • WingsruleWingsrule Posts: 3,009 ✭✭✭✭
    I beleive he was referring to modern times, since he referenced the Dow a 20-some odd ounce figure in 1970.

    Just goes to show you how reliable some of these talking heads can be. Perhaps I missed some type of "inflation-adjusted" comment.

    I just checked using the 'first day in December' Dow closing price for the last 20 years compared to a list of gold prices. The list did not explain whether it was a high / low / average for the year, but in 1998, I found the Dow closing on 12/01/88 at 2168 with a gold price of 410+, yielding 5.29 oz. 1989 and 1990 showed about 6.8 oz.

    I did not go back any further.
  • roadrunnerroadrunner Posts: 28,303 ✭✭✭✭✭
    The Dow/gold ratio has reached extreme lows of 1:1 or thereabouts, twice in the past century....last time was 1980. One could say that this ratio sort of tracks the stock and commodity cycles. Since the creation of the FED in 1913 the Dow/gold ratio goes through cycles due to expansion and contraction of the money supply. And the cycles have become more volatile and wider as time has progressed (ie more and more monetary games). When gold bottomed around 2001 the Dow/gold ratio was in the 40's. We've been inexorably heading back towards single digits ever since. We only recently broke 10...then 9...and soon below 8. It will slowly head "towards" 1:1 over the next few years. Whether it follows the past couple of cycles and gets there remains to be seen. Considering that the cycles have been widening, it is possible that we might actually go below 1:1. It seems reasonable to me that a ratio of 3:1 to 6:1 is probable.

    roadrunner
    Barbarous Relic No More, LSCC -GoldSeek--shadow stats--SafeHaven--321gold
  • DoubleEagle59DoubleEagle59 Posts: 8,297 ✭✭✭✭✭
    When the dow vs gold ratio is 1:1, then that is the time to sell PM's and buy stocks.
    "Gold is money, and nothing else" (JP Morgan, 1912)

    "“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)

    "I only golf on days that end in 'Y'" (DE59)
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