Dow Jones/Gold Relative Ratio, Annual Data from 1896

Wednesday, April 19, 2006 | 12:03 PM

This chart from technician John Roque shows periods of Dow/Gold ratio. The first two bold blue lines highlight the 14-year periods when gold outperformed the DJIA (1928-1942 and 1965–1979). The current third bold line shows that gold has been outperforming the DJIA since 1999 – implying we are ½ way through this cycle.
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DJIA / Gold Relative Ratio, Annual Data from 1896

Djia_gold_relative_ratio

Source: Natexis Bleichroeder
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Roque notes that the long term average for this ratio is 9.5 and as of March 31, its 18.9. The current cycle could run to ~2013 or until this ratio gets down to the single digits like. Either way it looks like gold (and commodities) have further to go.

I should have more on this in a related research project in a few weeks . . .

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Quote of the Day:

“English stocks are springing up like mushrooms this year, forced up to a quite unreasonable level, and then, for the most part, collapse. In this way, I have made over 400 pounds. [Speculating] makes small demands on one’s time, and it’s worthwhile running some risks in order to relive the enemy of his money.”

Karl Marx (from 1864 letter to his uncle)


Note: this info was emailed to clients on April 18, ~noon

Wednesday, April 19, 2006 | 12:03 PM | Permalink | Comments (42) | TrackBack (0)
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Comments

it was 1 to 1 in 1980
gold 5k/dow 5k?

i think this is one of the best risk/reward trades available.

Barry, you can chart this ratio v every US index and global index and it looks the same.. the Nikkei in gold is flat since 2003 with the nominal price up over 100%...

Posted by: vfoster | Apr 19, 2006 12:40:13 PM

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