There are various tools investors can use to help determine the future price of gold. One of the primary methods used by US Gold is the Dow Jones versus Gold ratio.

This ratio looks at how may ounces of gold it takes to purchase the Dow, assuming every point in the index represents a dollar. This ratio also reflects the markets confidence in paper versus physical assets like gold.

There is a historical relationship where at certain points in time the gold and the Dow trade at a 1:1 or a 2:1 ratio, where one or two ounces of gold can purchase the Dow.

When this happens gold has reached its peak in terms of purchasing power relative to other financial assets. These are periods where investors have lost confidence in paper assets. It occurred in 1896, 1929 and 1980 and we believe we are approaching this ratio again.

Yesterday 12.7 ounces of gold purchases the Dow. Yet during the height of the technology market in 1999 it took 44 ounces.

The number of ounces it takes to buy the Dow is now less than half. We believe this ratio will once again be 2:1.