The Price of Gold with a 5000 Dow. How about a 15000 Dow?

blackstone

It is pure speculation, I know, but what do you believe the price of gold would be if the DOW slipped to 5000 over the next few weeks?
Same question, but with a 15000 DOW?

DoubleEagle59

my strategy is 'get out of the Dow' and buy Gold.

It won't ever matter what the Dow is because Gold will reach a pinnacle price of a one-to-one ratio with the Dow.

Could be 5,000 Dow , $5000 ounce Gold, or 15,000 Dow and $15,000 ounce Gold.

We're at a nine-to-one ratio now (Dow approx. 10800, Gold $1250), so if it progresses to 1:1, where would you want your money to be invested?

RedHerring

<< <i> ...but what do you believe the price of gold would be if the DOW slipped to 5000 over the next few weeks? >>



Barring WWIII, a DOW of 5000 won't happen this year. But if it did happen? Gold could approach that level of $5,000/oz. A very possible scenario is the DOW re-testing the March 2009 lows within 2 years. At that point, gold could pass $3,000/oz.


DOW 15,000? That's a flow-blown miracle recovery, gold would stay near $1,000/oz.


It's fun to speculate but nobody knows what the future holds. 2011 doesn't look real good however.......

DoubleEagle59

<< <i>

<< <i> ...but what do you believe the price of gold would be if the DOW slipped to 5000 over the next few weeks? >>



Barring WWIII, a DOW of 5000 won't happen this year. But if it did happen? Gold could approach that level of $5,000/oz. A very possible scenario is the DOW re-testing the March 2009 lows within 2 years. At that point, gold could pass $3,000/oz.


DOW 15,000? That's a flow-blown miracle recovery, gold would stay near $1,000/oz.


It's fun to speculate but nobody knows what the future holds. 2011 doesn't look real good however....... >>



If we have runaway inflation we may have a Dow at 15,000, perhaps even higher.

But even at this high Dow figure, you'd most likely still be losing as it's valued in highly inflated dollars.

jmski52

what do you believe the price of gold would be if the DOW slipped to 5000 over the next few weeks?

I no longer own any stocks, but if the Dow dropped to 5000 from 10,400 in just a few weeks, I would be concerned about the cause of the drop, and that would dictate my estimate for the price of gold under those circumstances. I don't see a war situation causing such an immediate drop, and in the long run wars tend to boost the stock market, not cause it to fall. In the event of a war, it would also depend on what that war was about, and who was perceived as winning, and in which direction money was fleeing. That stuff is hard to predict. Gold is gold and it will have worth when paper does not, regardless of the nominal "dollars per ounce" valuation. That's pretty much the bottom line.

I would be much more concerned about governmental actions having an impact on the stock market, as in "higher taxes" and "more regulation". If a business can't make enough money to get traction and to pay its employees, the business goes away. If that keeps happening, there isn't enough inflation in the world to keep the doors open. That would be a cause of Dow 5000 for which I will have serious concern, not a war. If Dow 5000 happens because of a negative regulatory and tax climate, then I would expect gold to follow the stock market down as any profits from gold would be utilized to compensate for declining personal incomes across the board. How much would it decline? Not as much as the stock market on a percentage basis, but still it would decline. The international demand for gold would mitigate the decline a bit, however. At the risk of being repetitive, gold is gold and it will have worth when paper does not, regardless of the nominal "dollars per ounce" valuation. That's pretty much the bottom line.

If the Dow goes to 15,000 that would be something just short of a 50% rise, and if that occurred in just a few weeks' time, again I would have to question the reasons "why?" before making a speculative bet on gold. I guess that the most likely way that the Dow could rise to 15,000 in just a few weeks would be the threat of a massive default on US Treasuries, which could then trigger the US Treasury Department to declare a moratorium on debt repayments and the issuance of even more debt to paper-up the mess (which we already have). This situation could be exascerbated if all (or many) of the foreign holders of US debt decided to orchestrate a coordinated dump of their US Treasury holdings onto the market in an attempt to damage the US dollar as the unit of world trade settlements. There are no doubt enemies of the US who can't wait for this to happen, as it would theoretically put them into a better position on a comparative basis. Ask George Soros about the British Pound. An assault on the dollar can happen. The result of such a scenario would be rapidly accelerating inflation and price re-adjustments throughout the economy as paper became more worthless practically overnight. At the risk of being repetitive, gold is gold and it will have worth when paper does not, regardless of the nominal "dollars per ounce" valuation. That's pretty much the bottom line.

That is the Weimar hyperinflation scenario.

People always say, "put your money to work" in the stock market. They always say, "a company consists of people providing products and services" and that implies a certain worth that translates into value as a stock certificate. However, when you plug inflation into that equation a company's earnings can look as if they are increasing when in reality the earnings are being created by inflated dollars and actually represent a decline in productivity that is papered-over. The problem for companies is the same as the problem for individuals who have an asset that appreciates due to inflation and then must pay taxes on the imaginary "gain" when the asset is sold. The case for lower taxes is really the case for individual freedom, and an escape from servitude, and nothing less than that. Like I said, once a company can't make enough to pay its employees and to comply with increasingly onerous governmental regulation, that is one less corporation for the communists to take down, and as I understand it that is the plan. Hence the case for gold over paper stock certificates, at least until the current hostility towards the capitalistic system is reversed in a significant way.

Did I mention? That gold is gold and it will have worth when paper does not, regardless of the nominal "dollars per ounce" valuation? That's pretty much the bottom line.

RedTiger

5000 or 15000 in a few WEEKS? A 10% move in any one month tends to be exceptional, so a 50% move is almost beyond my imagination. Even the 1987 crash was only 40% from high to low, and it only stayed at the low for a short time. A nuclear war exchange, a coup d'etat in a major economy, or similarly unusual circumstance are about only scenarios that I could see moving the U. S. market that much in so short a time.

Those numbers in a few years might be a more realistic question. Gold owners might be surprised there is a chance that a low DOW might be terrible for their holdings, depending on the cause. There isn't a straight line correlation, sometimes gold and stocks rally together, sometimes they go their separate ways.

I do think gold is going to $3000 during the next several years, whether DOW 5000 or 15000 (or 10000) will come with that is harder to say. Moderate inflation can be good for certain stocks. Prices for products go up, profits go up (though perhaps not in inflation adjusted numbers), stock prices follow. Inflation also eventually filters to the real estate market, though that will be after the high mortgage rate cycle.

roadrunner

A rapid deflationary environment with Dow 5000 could easily result in gold at $1000 or even $700-$800, but the ratio of the Dow/gold will continue to fall. A 5000 Dow could also cause gold to go higher in price than today's levels, though probably not a lot higher.

If the Dow went to 15000 I would expect gold to increase by a larger amount, say to $2000-$3000, resulting in a lower Dow/gold ratio.

roadrunner

jmski52

A rapid deflationary environment with Dow 5000 could easily result in gold at $1000 or even $700-$800, but the ratio of the Dow/gold will continue to fall. A 5000 Dow could also cause gold to go higher in price than today's levels, though probably not a lot higher.

If the Dow went to 15000 I would expect gold to increase by a larger amount, say to $2000-$3000, resulting in a lower Dow/gold ratio.

roadrunner

That's what I was saying, in about 10X the number of words.

gsa1fan

I thought the dow & spot gold were to equal out at some point?

cohodk

<< <i>A rapid deflationary environment with Dow 5000 could easily result in gold at $1000 or even $700-$800, but the ratio of the Dow/gold will continue to fall. A 5000 Dow could also cause gold to go higher in price than today's levels, though probably not a lot higher.

If the Dow went to 15000 I would expect gold to increase by a larger amount, say to $2000-$3000, resulting in a lower Dow/gold ratio.

roadrunner >>



I would agree with that. The DOW and Gold could drop by 50% or double, and both do so at the same time. So it doesnt really matter whether you own stocks or gold, as long as you have more "dollar value" than when you started.

I hear constantly that the DOW hasnt gone anywhere in 10 years. Does anyone actually own the DOW? Thousands of stocks have done spectaularly well over the past 10 years. Find them, and you'll wonder whats so great about PM's. People spend so much time and energy reading "information" about the demise of the USA and the dollar. If they spent 1/2 as much time researching a good company, I believe they would have a much different opinion of the stock market.

Zubie

So...what are you guys doing with your 401ks? I pulled out of all my stocks, but, its in the bond market right now which probably isn't any better. Anyone have Vanguard?

Wingsrule

.........................................Open........High...........Low...........Close
Dow.......Jun 19, 2000 10,448.40 10,733.56 10,322.02 10,557.84
S&P........Jun 19, 2000 1,464.46 1,488.93 1,459.05 1,486.00
Nasdaq..Jun 19, 2000 3,818.65 3,990.79 3,818.65 3,989.83

While the Dow is essentially flat, the S&P is down about 25% and the Nasdaq over 40%. And look at the moves on that particular day!

Gold was around $285 and silver was just a shade under $5.00.

Remember that many companies in the Dow back in 2000 are no longer around. GM comes to mind.

fastrudy

Thank you for that comparison, it is quite enlightening!

The only way the DOW would drop so much would be by default of a major economy. China, Eurpoe, USA come to mind.

jmski52

So...what are you guys doing with your 401ks? I pulled out of all my stocks, but, its in the bond market right now which probably isn't any better. Anyone have Vanguard?

I'm not suggesting what anyone should do with retirement money, but Jim Sinclair's website has some interesting commentary this morning.

Vanguard has always been a well-run and low cost family of funds, with many reasonable ways to go, including checkwriting in some of their accounts. I liked the Short, Intermediate and Longterm Treasury Funds from time to time. They have a good S&P500 Fund that is useful when you like the market. I think that they even have a gold stock fund, but Van Eck has the one I'd be most interested in now.

Disclosure, I am not in any stocks at this time, but I am considering a small entry into Van Eck or something similar. Not in any rush to buy paper though.

roadrunner

I hear constantly that the DOW hasn't gone anywhere in 10 years. Does anyone actually own the DOW? Thousands of stocks have done spectaularly well over the past 10 years. Find them, and you'll wonder whats so great about PM's.

Don't feel so bad. For every time you've had to endure the mantra of the DOW going nowhere for the past 10 yrs., I've probably had to hear 10X that amount in how gold has been a poor investment for 30 yrs or the fact that you can't eat gold and it has no utility (except if you're a central bank with thousands of tons of it...lol). I just noticed for the first time today that the Dow/Gold ratio over the past 80 years has put in a distinct broadening top formation with the 3rd higher high occuring back in Oct 2007 and the 2nd lower low back in 1980. This would suggest that the current down leg will fall below the last bottom of approx a Dow/gold ratio of 1. Of course at this point some technician will chime in that Dow/gold is worthless because companies are continually tossed out of the Dow...hence the ratio over time in meaningless. But if charting is based on fear/greed/psychology does it really matter if the index is "worked?"

True, the Dow index is probably not owned by very many. But the S+P 500 certainly is, and the Russell 2000 probably is, and so is the Nasdaq, etc. And they too have gone nowhere in 10 yrs. along with 90% of the US stock market. Thousands of stocks doing well out of over 40,000 publically traded US stocks is still a tough target to hit. And if one includes all the companies traded on the world's various exchanges then separating wheat from chaff becomes even harder. Picking winners is indeed time consuming and all the SOx or GAAP "approved" financial data presented to the investor is not necessarily accurate or marked to market. It's a crapshoot. The fat part of the US 401K's is simply in broad-based funds and indicies such as retirement 20XX type accounts. As already mentioned, the Dow index from 2000 is not the Dow index of 2010 so from that view, so essentially no one is still invested in it. And while the Dow hasn't gone anywhere in 10 yrs, neither has the S&P, Russell, Nasdaq, and most every other broader stock index. A number of foreign exchanges may have show some 20-30% returns...before inflation. The Mexican IPC recorded a hefty 452% gain the past 10 years. So how many had the insight or kahunas to take advantage of that?

For every person who can pick stock winners, there are probably 99 who can't either due to lack of technical expertise or a lack of time. I think I can spot some decent gold companies at times but that doesn't keep the bankers from naked shorting them to death. It's almost a full time job to keep ahead of the rigged casino run by the flash traders...who ultimately decide who the winners will be. The best I think the average Joe can do is to pick a sector coming off the bottom and try to pick some respected companies in that area or go with its indexed funds/ETFs. Certainly one can pick seemingly hot looking stocks in any area based by chart patterns but it doesn't mean the company has the goods to be a longer term fundamental buy. The flash traders are getting better at painting the charts into any configuration they wish in order to help lure in J6P. In the end, it's all still gambling in one form or another.

roadrunner

RedTiger

As readers know, I'm primarily a stock trader (or options on stocks) going way back. With that, I mostly agree with Roadrunner, and chide Cohodk on misinformation. Most stocks have been flat to down during the past ten years. Out of the Wilshire 5000 stocks, I'd guess less than 250 (5%) have outperformed gold (up 350%) during the period, not "thousands" unless a person counts tiny cap penny stocks or is talking about trading in and out constantly. Probably 80% of those 5000 stocks have gone down moving with the SP500 (-25%) and Nasdaq (-40%) averages.

So sure, a few extremely lucky investors might have picked only those 5% super winners. So sure, some nimble traders were able to make money while the stock averages slid down. However, the average person, and by definition, most people are some what average, lost money in stocks, or at perhaps break even if they owned the DOW. The average gold investor made money during the past 10 years, without any fancy trading, without being lucky. If someone wants to talk about short term trading, a nimble trader in gold staying mostly on the bullish side had the opportunity to make huge money during the past decade.

Readers know that I prefer to invest with the odds in my favor, vs. shooting for 5% long shots.

BBN

I have a 457 made up of mutual funds and have averaged 10.3% since 2000. I'm 39, and with 457s you can't cash them out unless you have some unforseen emergency that you can prove you need that money, not to mention the taxes and penalties, so I have plenty of time to let the thing ride and just keep contributing. Right now my monthly investment money is split about 50/50 between metals and my 457. Each month I put $350 in my 457 and buy a quarter ounce of gold and two silver eagles. I feel pretty good about what I'm doing.

cohodk

<< <i>As readers know, I'm primarily a stock trader (or options on stocks) going way back. With that, I mostly agree with Roadrunner, and chide Cohodk on misinformation. Most stocks have been flat to down during the past ten years. Out of the Wilshire 5000 stocks, I'd guess less than 250 (5%) have outperformed gold (up 350%) during the period, not "thousands" unless a person counts tiny cap penny stocks or is talking about trading in and out constantly. Probably 80% of those 5000 stocks have gone down moving with the SP500 (-25%) and Nasdaq (-40%) averages.

So sure, a few extremely lucky investors might have picked only those 5% super winners. So sure, some nimble traders were able to make money while the stock averages slid down. However, the average person, and by definition, most people are some what average, lost money in stocks, or at perhaps break even if they owned the DOW. The average gold investor made money during the past 10 years, without any fancy trading, without being lucky. If someone wants to talk about short term trading, a nimble trader in gold staying mostly on the bullish side had the opportunity to make huge money during the past decade.

Readers know that I prefer to invest with the odds in my favor, vs. shooting for 5% long shots. >>



Dude. There is no such thing as luck. Do your homework and profit. Selling puts 20% out of the money for quarters is the pathway to riches--not!! Lets use your 5% assumption. Just 1 stock going up 2000% and 19 going nowhere, will still double your money.

AAPL has created 100's of billions of dollars of wealth for millions of people. PCLN had a 3000% run. AMZN 2000%. Dont like sexy internet stocks? Then how about US Steel--1800%, Valero energy--1400%, Halliburton 1000%. PMs will never acheive such returns. Saying stocks have been flat for a decade--comparing peak prices--is the same as saying gold is only up 50% over the past 30 years!!!! Hows that for misinformation? CSCO and INTC have had 2 100% moves, and many 50% in the last 10 years. And these are only on the long side. I could cite 1000 more examples, but why not just concentrate on the biggest and best. If you cant make money trading CSCO and INTC, then you probably have no business investing in stocks. Notice I didnt mention any "tiny cap penny stocks".

Just in the last 18 months, there are 100's, if not 1000's of stocks that have returned 500% or more--even mining stocks. Have PMs done that? Here's a clue---money is made where people are afraid.

Only static portfolios have not performed in the last decade. If your portfolio has been static, then thats YOUR fault, not the stock markets. Place blame where it is due. This country is becoming a joke where no one takes personal responsibility. Its so easy, en vouge, to blame others.

OPA

Nice summation cohodk .... you could at least have mentioned our Host's stock..., which btw is up 500% since 2008 & paying a 9% divident....

yellowkid

<< <i>So...what are you guys doing with your 401ks? I pulled out of all my stocks, but, its in the bond market right now which probably isn't any better. Anyone have Vanguard? >>



The bulk of my portfolio is with Vanguard, and if you are going the "paper route" IMHO it is the best place to be, cheapest costs in the industry. I know I won't get any support here for "paper," but if you sold when the market went down, you locked in your losses. The decision over PM's versus "paper," is a personal one. In my case it has much to do about what I think the future of our country will be in the next 20-30 years, if I am that lucky. I have taken a "paper," stand but I am heavily weighed in mining and gold stocks (I have an account with Fidelity to "play" with), I also have a growing coin collection and some gold put away. We own property also and I feel we are well diversified. IMHO putting all your eggs in one basket is not the way to go. It is a new world, and stock allocations that you might get from the "experts," can be, IMHO, hopelessly dated. I have a stock/bond/cash mix and I am weighted much more in foreign and emerging markets than many would be, it is what helped me to make money the last ten years when many in the market weren't, oh yeah, my PM funds helped too.
With all the bad news we hear every day, I still have faith in our people and our country, I don't think we are going to default on any obligations, nor is economic collapse on the horizon. I am not pollyanish about things though, there will be a lot of speed bumps ahead, if you are young and have a long term horizon, I believe "paper" is the way to go, tempering it with PM's or mining or PM stocks however is a good move. I think diversification is the key, and it is important to get your info about investing from different sources, don't make decisions based on things you hear in one place.

Edited to add, PS, many feel the Dow to be an antiquated measure, and prefer to use the S&P.

BBN

I'm with you yellowkid. I've mixed a lot of my stuff and most of the people who lost in the market in the 2008 downturn did it because they bailed out at the bottom. I don't see a "Mad Max" scenario happening in this country and this scenario has been talked about for decades. There will be no SHTF scenario and if it does hunks of gold will mean little. Bulk bags of food, seeds, livestock and chickens, trade skills, and an arsenal of weapons will be all that will be handy in a SHTF situation. If one truly believes this will happen then load up on seeds, bags of dry rice, dry lentils and get some chickens.

I can't pull my money out and that may be a good thing to save me from myself. I like my current 50/50 split and that would not be a good split if that 50/50 was only $100/mo, but it's just over $700/mo. My future is secure.

roadrunner

In a real SHTF scenario all that stuff will not matter as it will be taken from you as soon as you're out of ammo or get overrun, regardless of where you live or how isolated one is out in the country....if you have stuff, you will be found and taken out. In that scenario gold will probably still matter as it has over 5000 yrs of multiple SHTF scenarios occuring around the world. In any case the likelihood of a Mad Max scenario is remote today in which case gold will function as money/barter in one way or another. If such a scenario does come to pass I'll probably get taken out in the first wave of bullets, knives, and pitchforks. C'est la vie. We can't live our lives today expecting to be the next Snake Plisken.

AAPL has created 100's of billions of dollars of wealth for millions of people. PCLN had a 3000% run. AMZN 2000%. Dont like sexy internet stocks? Then how about US Steel--1800%, Valero energy--1400%, Halliburton 1000%. PMs will never acheive such returns. Saying stocks have been flat for a decade--comparing peak prices--is the same as saying gold is only up 50% over the past 30 years!!!! Hows that for misinformation? CSCO and INTC have had 2 100% moves, and many 50% in the last 10 years. And these are only on the long side. I could cite 1000 more examples, but why not just concentrate on the biggest and best. If you cant make money trading CSCO and INTC, then you probably have no business investing in stocks. Notice I didnt mention any "tiny cap penny stocks".

This is apples and oranges again comparing stocks and other leveraged items to holdings of raw metals. They aren't the same thing and don't perform the same function. Instead of US Steel stock why not compare the price of raw steel in this example? Let's pull out the best gaining gold stocks of the past 10 yrs to give those big caps a run for their money. Gains of 1000+% are not that hard to find. And some of them did that from 2001-2004 when the main market was in the toilet. By 2015 I would expect gold and silver stocks to FAR outperform Apples, Halliburtons, US Steels, etc. Some better known junior PM stocks will no doubt reach returns of 5,000 to 10,000%. Gold will still outperform the general stock indicies (and J6P's 401K) by leaps and bounds, but obviously not those select top 5% gainers.

Bottom line is that stocks have not brought wealth to most J6P's over the past decade. Your average investors hold too long and sell too late....doing even worse than if they had just held for the whole 10 yrs. The system is rigged against them from the 1st day they get a handy brochure on how to invest their 401K funds....just like everyone else. We can call it laziness on their part or even lack of smarts, etc. But the system is designed to transfer wealth from J6P to bankers/brokers/govt.....and it does that very well. The bottom line is that we all can't be in this casino at the same time and all retire in comfort. That's the definition of a Ponzi scheme. Brokers, traders, and bankers certainly have a leg up on J6P and that will always be the case.

Those winners listed above aren't about to see 1000-2000% gains anytime in the next 10 years. That's last decade's news with the occasional Apple being an anomoly. But a wide percentage of PM stocks will most certainly see 1000% gains in the next 5 years as their time is still coming. I would expect to see GDXJ increase by 500%. Gold stocks have floundered and see-sawed for much of the past 4 years. That will change once investors realize these guys are mining real precious metals and not swapping paper.

roadrunner

OPA

<< <i> But a wide percentage of PM stocks will most certainly see 1000% gains in the next 5 years as their time is still coming. I would expect to see GDXJ increase by 500%. >>



When I see you stop posting, then I know your wish has come true.

gsa1fan

"That's the definition of a Ponzi scheme. Brokers, traders, and bankers certainly have a leg up on J6P and that will always be the case. "

Daddy always said,"never try to beat another man at his own game"

jmski52

Some better known junior PM stocks will no doubt reach returns of 5,000 to 10,000%.

My goal is to be there when they do!

RedTiger

Cohodk,

You said something factually incorrect, that 1000s of stocks have outperformed gold over the past decade. I called you on that misinformation, because there are a lot of novices reading along. There is no need to get personal on investment styles. I wish I was as talented and nimble as you are at trading--but I am not. Slow nickels are fine for where I am at. If that bores you to death, who cares? I'm not trading to please you.

I tend to point out what the average person can expect. If someone else wants to point out what the top 5% might expect, go ahead, but average readers shouldn't look for those kinds of returns. In your response, you slammed static investors. How ironic is that, when the average static investor tends to do better than the average active trader. The average active amateur small fish trader in stocks, probably did far worse than the -25% on the SP or -40% on the Nasdaq over the past decade, not better. A large percentage got wiped out completely. Maybe you haven't run into any people that had their lives wrecked by active short term, high risk trading. I have met at least two in person, and can report that it is a very sad thing when a person's life savings were lost in a few months of bad market.

A lot of novices come to these forums. Someone like you is respected because of your experience, and your knowledge. Unfortunately, some that don't have your talent might believe what you write, that they can make big money day trading or doing short term swing trading. The reality is that it is the top 2% to 5% of traders that have any chance at matching your performance. Most active amateurs do far worse than buy and hold or dollar cost averaging or similar static strategies, as commissions, spreads and emotions eat them alive.

That's why I always tell the novices to focus on being average. A person that is truly talented doesn't need advice.

roadrunner

When I see you stop posting, then I know your wish has come true.

When I stop posting here it will only be because I am physically incapacitated or the forum gets shut down. It won't ever be because of how much or how little I earn per year. Then again, profits of 5,000% might be capable of incapacitating me for at least a short while.

roadrunner