Big Picture View of the Dow/Gold Ratio

Published by Nick Laird | May 7, 2015 | Articles

Here's the big picture view of the Dow/Gold ratio.
 
Here I speculate that the Dow/Gold ratio is going to repeat a similar trend as seen in 1977-1980 where after a bounce the Dow/Gold ratio then fell from 10:1 down almost to a Dow/Gold ratio of 1:1
 
 
200 years - Dow/Gold Ratio
 
 
Here's a short term view showing the next possible leg down.
 
 
50 years - Dow/Gold ratio
 
 
Here's a close up view where you can see the prices for the Dow and Gold back in the 1970's.
 
From 1971 when stocks were high and gold was low the Dow/Gold ratio fell from 24:1 down to 3:1
 
Then in 1975-1976 the Dow/Gold ratio rebounded back up to almost 10:1 were again the stocks were high and gold was low.
 
Then came the final run down to the lows in the Dow/Gold ratio in 1980 where they almost met at 1:1
 
 
Dow/Gold ratio
 
 
Here's the current picture in the Dow/Gold ratio.
 
In 2000 stocks were again high with gold low and the Dow/Gold ratio went from a high of 45:1 down to a low of almost 5:1
 
Then in 2011 with stocks low and gold high the Dow/Gold ratio rebounded from a low of 5:1 back up to 15:1 which is where we now stand.
 
So we are similarly placed as to in 1977 with stocks high and gold low and the new trend soon to emerge.
 
 
Dow/Gold ratio v Gold
 
 
Here you can see the price percentage that gold fell during both of these rebounds in the Dow/Gold ratio :
 
- In 1975-1976 gold fell approx 45%
- In 2011-2014 gold fell approx 40%
 
 
Gold Bull Market Declines
 
 
This chart shows the global sentiment on sharemarkets with the top 10 sharemarkets in a composite index.
 
Here it shows that we are potentially at a top (or soon to be).
 
 
Major composite index
 
 
Be it that we are now seeing a top in stocks and a low in gold then I postulate that the Dow/Gold ratio now has the potential to run down to new lows in a similar fashion to 1977-1980.
 
We potentially are seeing the highs in stocks and lows in gold with the potential for money to move from one sector into the other.
 
 
Dow/Gold ratio
 
 
Potential exists for the Dow/Gold ratio to fall down to the 2:1 region or lower.
 
The following potential price for gold on attaining a Dow/Gold ratio of 2:1 are:
If the Dow declines 20% to 14,400 then gold would be at $7,200
If the Dow declines 50% to 9,000 then gold would be at $4,500
If the Dow declines 80% to 3,600 then gold would be at $1,800

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Nick Laird  Chartist / Member of the Goldbroker.com Editorial Team

   

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