via Realterm.de - Dow In Gold

Realterm has not updated their DAX in Gold comparison since May 17. One comparison that might serve is the Dow In Gold comparison. As you might have noticed, neither the 1929 stock market crash, nor the 1980 inflationary blow-off matches the decline of the Dow against gold since year 2000. (this one has a date of Feb. 15)

As is suggested by the log scale chart, we still might have a proportionate decline ahead. But the S&P has broken out of its broadening pattern, and the Dow just might do the same. The Dow can RISE against gold here, even though gold might rise as well.

The prognosis is for more quantitative easing, which may very well lead to higher equity prices. I would be watching for instances of negative nominal rates at the short end of the curve, but so far no chronic macro condition, except just low rates. (such as a drastic decline in the U.S. dollar, Euro or Pound, or negative nominal rates.)

source: http://www.realterm.de/DOWinGold.php

The DOW has actually risen against gold, much like the period after the crash in 1929, but realterm will have to update their charts:

http://scharts.co/18kiw7K

Conclusion: If stocks have broken out against gold, then gold equities are favoured over bullion. Gold prices have only limited upside from here, perhaps for a double or a little more, and then a major termination of the bull market to follow. This fits with an elliot wave paradigm of a Wave One extension.

But that should also explain why gold mining equities are favoured for more return.

-F6