Status On The Dow/Gold Ratio

By Kirk Lindstrom:With the DOW making record all-time highs and the price of gold well below its 2011 record high, the Dow:Gold ratio has soared. Despite recent gains, the Dow:Gold ratio remains 77.5% below its all-time high.

Kirk Lindstrom submits:The Dow-gold ratio is right at its long-term, down-trending resistance level. The Dow-gold ratio is defined as the ratio of the price of the Dow Jones Industrial Average divided by the price of gold.

More speculative gold buyers appear to have been spooked by the FOMC minutes from the Fed’s January 30th meeting which “said the central bank should be ready to vary the pace of their $85 billion in monthly bond purchases amid a debate over the risks and benefits of further quantitative easing.”  Gold rebounded this morning from a 7 month low as physical buyers in Asia bought the dip and it is likely that central banks are also accumulating after this sharp correction.

In the Investor Alert, our investment team shares charts and data that we believe provide readers with a first mover advantage. While markets don’t always move like we anticipate, recognizing historical trends can provide an edge if you act quickly.

Kirk Lindstrom submits:The gold-to-silver price ratio, defined as the price of an ounce of gold divided by the price of an ounce of silver, closed Wednesday at 45.16 This means an ounce of gold is just over forty five times more expensive than an ounce of silver. As my chart below shows, twenty years ago in 1991, gold was over 100 times more expensive than silver. Since then, the gold-to-silver price ratio never went below 41.51.

ByJosh Arnold:With the Dow Jones Industrial Average (DIA) at an all-time nominal high, it is worth examining the ratio of the DJIA to Gold (GLD), as the measure has been an interesting guide to future prices historically. We can learn much from the relationship in terms of pairs trades for the future.

By Paulo Santos:A recurring theme gold [(GLD)(IAU)] speculators use to justify their positions, is that gold, over time, works as an inflation hedge. This argument has severe problems.