Dow Gold Ratio

The DOW/GOLD chart is a powerful tool in order to determine major turnarounds. It's simple, when the DOW/GOLD chart tops you buy gold, when the DOW/GOLD chart bottoms you buy equities. Once you've established your position you can ride the wave up or down for at least a decade. The DOW/GOLD chart flashed a 'buy' for Gold again in the year 2000 and indeed 8 years later Gold is already 200% off its lows since then. The DOW/GOLD chart tells you to hold on to your Gold until a new bottom has arrived in the 1 - 5 area. Well, if it were all that simple why don't we hear that much about it ?

Well, as said before the DOW/GOLD chart isn't useful at all in order to predict yearly price movements. It could very well be that next year will show a higher reading than this year instead of an expected lower reading thereby losing confidence as being a reliable indicator. Unfortunately that's the same analogy as denying that higher temperatures will arrive in summer based on a single day temperature drop in spring. The problem is that the DOW/GOLD cycle has a wave length that's so big that we humans have a hard time to figure out where to position ourselves into this cycle. Nevertheless many veteran analysts such as Richard Russell and John Hathaway do refer to this cycle. Indeed history does suggest that the DOW/GOLD ratio bottoms periodically in the 1 - 5 range. The Dow/Gold ratio topped in 2000 far above 40 and is heading down now (current reading at 13.8). If the DOW/GOLD ratio can live up to its expectations than we can expect a new DOW/GOLD bottom shortly after the end of this decade.

I've said this many times over the last several years but, thanks to Eric Hommelberg's efforts, this chart says it all. SAN is positioned to take full advantage of $2000.00 gold!

Another ratio suffering "lagtime" is the Gold/Oil ratio. In 1980 when the Dow/Gold was between 1-5, Gold/Oil reached an alltime high of 21. Today it languishes at 7.35.

IMHO, all's well for the longer term. Both ratios put gold into the $2000.00 range or higher, with all else moving forward (no TO) SAN shares would reach the $10.00 plus range!

Rome wasn't built in a day! (Also, they were'nt attached from the rear during construction!)

RUF