Another DOW/GOLD Ratio Perspective
Many thanks to Sir Rambus for his insight on the Dow/Gold ratio. However, I do believe this ratio will get to ~ 1/1 sometime within the next 15 years based on this chart. Try not to laugh at the 15 year comment. That is a relatively short period of time when you account for the incredibly epic structural changes that will occur in our civilization in order for that ratio to achieve 1/1.
The Log chart shows that the ratio only made it approximately halfway to its ultimate destination in 2011 where it bounced hard. That bounce continues to this day. I think this bounce could continue up to the 1/21 ratio. As you can see, the combination of strong resistance and the 38.2 Fib retracement make that area a juicy target. If the ratio continues its current bounce and were to break up through the 21 area, I will be forced to reexamine my view on this ratio, and my entire economic philosophy.
The first half of the drop in this ratio was deflationary. The second half of this drop will be inflationary IMHO.
Nice Neil
21 is still a long way from here.
Implies the Dow outpacing Gold by quite a bit it the shorter term (a few years)
Very interesting view. Possible interesting target to try a short on SM. My compliment – so no, I am not laughing!
True. I could see a scenario where the Dow hits around 22,000 and gold makes a double bottom at $1045 to give us 1/21. If the trend were right, that could happen before the years is out, but anything is possible. Maybe we don’t even get to 21. Who knows? If we do get to 21 though, it’s make or break time IMO.
Ya make or break…like Runaway Train
No laughter here, either. Over the weekend I absorbed some pretty insightful reminders of the end game that is fast approaching. Can we last another 15 years doing this junk? Methinks not. I believe we will arrive at the “final destination” sooner than 15 years. Great perspective in living color – many thanks!
The 100 year log Dow/Gold ratio chart at Macrotrends indicates that as an investment class the dow/gold ratio is stretched and may get stretched more (granted) however I can’t risk missing the turn (down in the ratio) at this level so I’m staying IN – IMO it’s a poor bet to try and get out and back into PM’s at 20% lower GOLD spot vs. where gold could go (up) from here and isn’t worth being out. BTW, the stock/gold ratio today is around where it was at the peak of 1929 and the 10 or so years (1960-71) preceding the 70’s PM rollercoaster ride. Rambus’ charts are helpful for the current multi-decade cycle however at this elevated level in the ratio (100yr cycle), the Jan ’16 to Aug ’16 bull run is a major sign of what could come and I’m not going to miss out. I’m also not going to be long stocks at a around 26 P/E in the S&P. I’m not expecting a 1:1 D/G ratio however I am going to start unloading around 5:1 and accelerating as it get’s lower.
Good Show ND. I am in the same boat as you. But gosh 15 years!!! Makes sense actually a couple of years more in the bear then a 10-13 year bull market