Update - Gold vs Dow

From Chart of the Day:

The stock market has been rallying over the past 10 months. So, is the stock market performing well? It all depends on how you measure. When measured in US dollars, the Dow currently trades approximately 29% below its all-time record high. However, when measured with that other world currency (gold), the picture is even more bleak. To help illustrate the point, today's chart presents the Dow divided by the price of one ounce of gold. This results in what is referred to as the Dow / gold ratio or the cost of the Dow in ounces of gold. For example, it currently takes 9.3 ounces of gold to “buy the Dow.” This is considerably less that the 44.8 ounces back in the year 1999. When priced in gold, the US stock market has been in a bear market for the entire 21st century.


With the recent moves of the Dow, an opportunity may be developing to shift some stocks and fiat currency assets into physical gold, silver or platinum.

Yes, gold has pulled back somewhat in US dollars, but in Canadian dollars and Euros it has hardly moved.

Central banks continue to show determination to flood the system with fiat currency in an attempt to thwart the deleveraging cycle.

Will they succeed?

Only time will tell.

There are huge deleveraging, deflationary forces to overcome before inflation can once again raise its ugly head.

We will attempt some calculations of the amount of currency printing that will be required to overcome the deflationary forces in a future post.


  1. Sorry,you are wrong.Look at the chart better.This chart is misleading because of deformed scale.The majority of the gold rally is behind us.It went from 45 to 7or8.It is not far from historic high of 1,5.
    We are in a credit crisis or debt crisis Depression/Deflation.Cash is the King.
    Learn from Japan.

  2. While I agree Yugo that we are in a debt and deflation crisis, my view is that gold may have considerable upward momentum in the next two years or more. All the deficit spending and money printing can only lead to lack of confidence in fiat currency as a store of value. Even Japan is now on borrowed time. They are likely closer to a hyperinflationary event than other countries, but the thinking that got us into the crisis is still with us. Central banks and governments will likely attempt a mad spending binge to borrow our way to prosperity. It is a doomed idea.

  3. Gold can go higher,no doubt,but it will be spike.For normal people in USA I recommend Canadian Dollars and Euros if USA and/or USdollar go down as it looks right now.Simply,foreign currency is much more liquid and practical than using gold .During bad times spreads on gold are terrible and you can end up giving a golden ring for a loaf of bread.
    In Yugoslavia we were fine with DeutschMark,nobody needed or used gold.
    Canada is good country,sound and prudent-they will be fine.

  4. As you rightly point out Yugo, gold is not the most convenient currency. My concern is longer term, central bankers all seem to fall into the same trap of rapid monetary easing and printing. In Yugoslavia you were fortunate enough to have a strong currency in the DM to act as a substitute during the 1991-1995 war. My concern is we will see competitive devaluations of All fiat currencies in a race to the bottom between nations. If this happens, only gold and other tangibles can withstand the crisis.


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