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Sunday, August 09, 2009

The DOW Measured in Ounces of Gold Up 39% From Recent 17-Year Low

The Dow Jones Industrial Average measured in how many ounces of gold it takes to buy the 30 stock DOW is up 39% from its 17-year March 6th low of 7.03. Despite that impressive gain, the DOW-Gold ratio remains 78% below its 1999 peak of 44.77.

Here is a chart showing the current Dow to Gold Ratio, the ratio of the price of the Dow Jones Industrial Average to the price of gold.

When measured in ounces of Gold, the DOW has been in a secular bear market since peaking in late 1999.

Click chart courtesy of for full size image

The markets, measured by the S&P500 (S&P500 Charts) and DIJA (DJIA Charts), may have reached new highs in 2007, but the DOW:Gold ratio told a different, truer story of just how unhealthy the US economy was.
  • Back in 1999, it took 45 ounces of gold to buy the DJIA.

  • On Friday March 6 of 2009 the DOW-Gold ratio hit a low of 7.03

  • As of Friday (August 7, 2009) it only took 9.80 ounces of gold to buy the DOW, a nice jump from the recent low.
The scary part is the DJIA-to-Gold ratio got down near 1 in the early 1980s and was just under 0.2 in the early 1800s.

With fiscal irresponsibility in Washington DC as well as many states such as California, many people believe we will have hyper inflation in the future that could give us a DOW-to-Gold ratio near 1.0 again.

Which way do you think the DOW-Gold ratio is headed?

Post your answer here.

This 200 Year Dow/Gold Chart shows the DOW/Gold ratio from 1800 through August 2008.
Click chart courtesy of for full size image

With the DOW:Gold ratio now at 9.80, it is trading below the green zone in the second chart. The ratio is oversold, but nothing says it can't get more "oversold."

CDs have been a "safe haven" for those wishing to preserve assets and get a small inflation adjusted return. See "Very Best CD Rates with FDIC" for a list of the best rates and terms.

US Treasury rates are so low, that they are paying less than long term inflation. See:

As of August 9, 2009, "Kirk's Newsletter Explore Portfolio" is up 15.9% YTD vs. DJIA up 6.8% YTD.

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  1. 2.....DJIA 1400, Gold 700.

  2. Sep. 16, 2009
    If we follow the Weimar example, it would not be unreasonable for the DOW to reach 50,000 or more. My guess is with the coming debasement of fiat currencies, and especially the fiat dollar, a DOW/GOLD ratio of 0.1 is logical. So then GOLD would be priced at $500,000 per ounce. As absurd as this seems today, I believe GOLD during the WEIMAR hyperinflation added 12 zeros! I suspect we will all be surprised. Chris


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