How will we know when gold has peaked? One of the past indicators is the DOW:GOLD ratio that has typically fallen to between 1 to 2 in 1932 and 1980. This ratio currently lies at 11.30 after peaking at over 43 in 1999. If you are of the opinion that the DOW has limited downside from the current level then the only variable that can drastically change is much higher gold prices.

Even if the DOW drops to 1995 levels (4000) then we could still be looking at between $2000 to $4000 gold price. I don't see the DOW falling back to the 1000 range as some suggest, which would take us back to pre-1980 levels.

Below is a great chart illustrating this ratio over the past two K-Cycles.