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.