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-- Posted Monday, 1 February 2010 | Digg This Article | | Source: GoldSeek.com
If the Dow Jones Index is expressed in the only currency that does not inflate over time then the ongoing bear market is very clearly visible, with the rally of last year nothing more than that, and we have to ask how will this ratio proceed until it reverts to the bottom of one last seen in 1980. Then the gold price was $850 an ounce and the Dow index highly depressed during the last big US recession. Looking at this chart and extrapolating forward then gold prices look to be going much higher, while the Dow Jones is in for another downturn. Commodity boomSimply stated it can be noted that over time gold, oil and other commodities have a reverse correlation to stock and real estate markets. One is rising while the other is falling, and vice-versa. The Dow:Gold chart shows this inter-relation very neatly. So to revert to the long-term low point of one on this index almost certainly requires a combination of gold heading much higher in price and the Dow taking a tumble. And is that not what the bearish noises on Wall Street and the bullish babble from gold bugs is telling us? Are we not heading into a couple of years of near depression like 1980-2 with stock market prices too high right now? Is gold not increasingly attractive to investors with bond prices looking very vulnerable in particular, once stocks have corrected? Other scenariosTry to turn it the other way round – which is also a way to the index point of one. Then stocks would have to fall by almost 90 per cent just to get to the current gold price, or the gold price would have to surge by a factor of ten to meet the current Dow. Interestingly none of these scenarios is negative for the gold price. You would need to see the Dow:Gold trend broken entirely for that to happen, and what on earth could do that? Long-term trends in major asset classes are among the most reliable of indicators. Given that the trend is your friend until it is not, then the Dow:Gold chart is a guide to serious investors about where to put your money for the next few years. Of course, this is a long-term trend, so a short-term setback for the gold price can still happen as the Dow first sinks, and might be expected as the dollar would rally strongly.
-- Posted Monday, 1 February 2010 | Digg This Article | Source: GoldSeek.com
Previous Articles by Peter Cooper
About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in
1999 to complete his first book, a history of the Bovis construction group.
Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.
 Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.
He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.
Order my book online from this link
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What Does The Dow:Gold Ratio Signal For Prices Ahead?
