The DJIA/Gold Ratio

Target Practice

DJIA/Gold Price Ratio

Given the worldwide economic circumstances we are all familiar with, everyone wants to know gold's ultimate price target. 

While Benchmark Gold (for members only) has an unpublished goal, there is a historical precedent that may be used as a general guide. 

Historical Target Ratios

Every 36 to 48 years, the DJIA/Gold price ratio has been close to a 1 to 1 ratio, meaning they are both roughly equal in price. Ratio average is about 1.55.

For example: 

• 1896 it was 1.28/1
• 1932 it was 2.07/1 (1933, 1.94/1)
• 1980 it was 1.29/1

It has now been 42 years since the last event. Not exactly a whole lot of data points to work with except for the number of years in between.

Current Ratio

In Feb 2022, the ratio was 18/1.

Current Daily Ratio chart here

Updated 100 year chart here 

 

For the gap to close, either: 

• The stock market makes a huge drop  
• The price of gold increases dramatically 
• A combination of the two has to occur (most likely)

Interesting Ratio Question

Could the DOW and Gold have a 1/1 ratio with both rising higher?

Theoretically yes but Gold would still have to play catchup in big way. This is questionable unless there is an out of control inflationary spiral and a surge into assets of value and/or a Gold price reset of some sort.

Reliability of Ratios

Theoretically, tomorrow morning the DJIA and Gold price could each be $5000 reflecting a 1/1 ratio. Theoretically, but not in practice. Why?

It's a matter of slowly shifting value and sentiment trends over long periods of time. Like anything else in life, extremes will occur, but not often.

At best, the historical DJIA/Gold ratios are more like general goal posts to keep in mind long term but not invest in or depend on directly. 

Keep in mind the historical results. However, the next event "may" have a 3 to 1 ratio result or even better, not necessarily a near historical 1/1 ratio.

Precise dating for the next target event cannot be predicted at this time but is likely within the next few years.

Value of Ratios

Price ratios are important in terms of the relative valuation between two investments at any given time. 

Having multiple ratios saying the same thing close to each other, has a far greater value, weight and reliability. 

For example, keeping in touch periodically with the three Key Ratio parameters and their trends at the Benchmark member site, is clearly important.

Sounds like a plan.

2/23/22

Trader Garrett

Related: Gold Rush!

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Caveat

While past performance and probabilities are favorable, results are not guaranteed. Use these trade plans, stocks or comments at your own risk. All analytical content and commentary provided within or from this site is aimed purely to educate or inform readers on the potential technical and fundamental aspects and possible value of intelligent, mathematically based research tools and charts for due diligence purposes.