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Friday, April 08, 2011

Dow-Gold Price Ratio Continues Decline

Two months ago I pointed out in a Seeking Alpha article that the Dow-Gold Ratio had reached a level of strong resistance.
The Dow-gold ratio is defined as the ratio of the price of the Dow Jones Industrial Average divided by the price of gold.

At Thursday's close of 8.51, the Dow Jones Industrial Average, measured in how many ounces of gold it takes to buy the 30-stock Dow, is up 21.1% from its 17-year March 6, 2009 low of 7.03. But, as the chart below shows, the ratio has been in a fairly flat, two-year trading range as it moved from long-term support to resistance.
click image for article with 3 graphs
Despite good gains for the Dow since March 2009, the Dow-gold ratio remains just above its March low and 81% below its 1999 peak of 44.77.

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