Dow of Gold

We just hit a major top in the Dow as well as in the S&P. They can’t go much higher. (No, I’m sorry but bear markets don’t usually last for 5 1/2 years after an 18 year charge).

Commodities have begun to pick up for a few years now. The way I see it, when Gold tops the markets rebound, and when the markets top…you get the point. Here’s a relative chart of Gold and the Dow. (I’m not a very big technical analyst but these just let you see a broader picture). It seems to me that about every 35 years or so there is an “irrational exuberance” in the Gold/Dow Ratio. In March of 1980 you could have bought the entire Dow for just over one ounce of Gold. Today the ratio would be about 19.5 (11,700/600).

I don’t think that Gold will multiply 19 times nor will the DJIA crash entirely, but what does seem inevitable is a progressive adjustment back to a single-digit ratio. And when it does, then buy stocks for the long run. (2015 sounds about right).

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