Bull Market Thinking Article on Gold to Dow Ratio

BullionDollarMan · Mar 21, 2013

Hey Guys,
Thought this was an interesting article on Goldow
I've just picked out the charts and extracts from the article. The full article can be found at:

http://bullmarketthinking.com/200-years-of-the-dowgold-ratio-suggest-staggering-moves-dead-ahead/

200 Years Of The Dow/Gold Ratio Suggest Staggering Moves Dead Ahead

March 20, 2013 | By Tekoa Da Silva

One of the more fascinating reminders of what may be to come for the remainder of this gold bull market, is the charted history of the dow/gold ratio. Below are two charts illustrating the upward potential in gold which remains for the duration of this market.
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When (and if) Central Banks participate in the dow/gold ratio trade, their monetary toolbox can assist with the timing and severity of the move.
Essentially, the best way to play the dow/gold ratio trade, is to do so with an understanding of the timing of Central Bank participation (through gold purchases & sales), and monetary expansion & contraction.
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What these two charts leave to the imagination however, is the extent and severity of the bottoming of this cycle. In looking at the visual trend being set over the last 100 years following the Fed's formation, one might consider a bottom occurring under a 1-to-1 ratio favoring gold.
A skeptic could also conclude in looking at the first chart, that the majority of the move has already occurred, with only meager gains left remaining.
In response to that, the Pareto Principle suggests that 80% of the gains are found in the final 20% of the bull market. As it currently stands, the dow/gold ratio is sitting at roughly 9-to-1. A move to a 5-to-1 ratio, would require a $2907 oz. gold price, a 3-to-1 ratio $4845 oz., and a 2-to-1 ratio would require a stunning $7268 oz. gold price.
A 2-to-1 ratio move from here equates to a 400% move higher in gold, and of course, a 1-to-1 ratio ($14,500 oz.) would equate to an over 900% move left remaining in the gold bull market.
So is a move to a 2-to-1 ratio or lower in the cards? That's ultimately for you to decide. But when we look at the climate, it appears that the worst of the financial problems are only just now bubbling to the surface. Additionally, why would Central Banks be acquiring record-setting amounts of gold unless they also expect a powerful thrust downward in the ratio?
Bottom Line: If you expect major fireworks in the future; a jubilee of financial, economic, & social unravelingthen expect the dow/gold ratio to drop lower. Much lower.
Enjoy the article? Please support the site by sharing this URL page link with friends, family, and your favorite chat forum.
Thanks,
Tekoa Da Silva
Bull Market Thinking
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Cheers
BDM

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Bull Market Thinking Article on Gold to Dow Ratio

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