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DOW:GOLD – READY TO RESUME THE DOWNTREND?

31 July 2010 by Guest 7 Comments

By Chart of the day:

For some perspective on the stock market, 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 9.0 ounces of gold to “buy the Dow.” This is considerably less (80% less) than the 44.8 ounces it took to buy the Dow back in 1999. While the actual Dow currently trades significantly higher than its March 9, 2009 lows (currently up 60%), the most recent rally that occurred in the Dow priced in gold is fairly similar to several bear market rallies that have occurred since late 1999. It is also of interest that the Dow (priced in gold) is once again testing resistance of its accelerated downtrend.

Notes:
- Where’s the Dow headed? The answer may surprise you. Find out right now with the exclusive & Barron’s recommended charts of Chart of the Day Plus.

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Comments
  • jrsun

    amazing

    07/31/2010 at 1:18 AM
  • Johnny`

    That’s only because gold is so overvalued though…

    07/31/2010 at 10:37 AM
  • jrsun

    overvalued? how do you value gold?
    simply comparing to the past 7 years it’s overvalued?

    07/31/2010 at 10:50 PM
  • boatman

    yes yes yes

    08/02/2010 at 4:40 PM
  • carlsa

    putting two vehicles on a chart does not imply causality. One could say that the common link is the US Dollar, but that adds a third variable. Too many conclusions being drawn from too few data points.

    08/02/2010 at 6:15 PM
    • BRTD

      No, it doesn’t imply causality. It’s simply a measure of relative value to juxtapose against the common measure of the Dow in dollars. It serves to indicate a true bottom for the Dow, and perhaps a top for gold, when the ratio achieves 1:1. It may yet be several years away.

      08/04/2010 at 2:29 PM
  • JLW

    would like to see the chart going back to 1971. That would give it more historical meaning.

    08/02/2010 at 7:14 PM