The chart above shows the weekly Dow-to-gold ratio. Currently, the ratio is standing at 8.10—meaning, to buy the Dow Jones Industrial Average, it will cost 8.10 ounces of gold. For it to get to the one-to-one ratio mark, either the Dow Jones Industrial Average will have to fall substantially or gold prices will have to rise, or more likely a combination of both will happen.
Let’s say the Dow Jones Industrial Average falls back to where it was when the bear market started: 6,440 on March 9, 2009. In that case, gold prices would need to rise to $6,440 for the one-to-one Dow-to-gold ratio to be reached.
Dear reader, the future prospects for gold prices are nothing but shiny. A little dip in prices is normal and it is not fazing me the least. As long as central banks run their printing presses in overdrive mode, you can expect gold prices to go higher.
Where the Market Stands; Where it’s Headed:
While it’s still early in the month, stock prices have remained relatively flat in January. Since 2010, stocks have always enjoyed a healthy rally in the month of January. Could this year buck the trend? I wouldn’t be surprised. Rising stock prices look like they are running out of gas.
What He Said:
“Why Google stock will go higher: Most investors in Google, surprisingly, are retail investors. And that’s why the stock can go higher—because only 20% of the stock is owned by institutions. If the institutions jump in and buy Google, the stock will certainly move higher.” Michael Lombardi in Profit Confidential, June 2, 2005. Michael recommended Google stock as a buy on June 2, 2005, when the stock was trading at $288.00. On November 5, 2007, when Google reached $700.00 U.S. per share, Michael advised his readers to sell their Google stock and to put the proceeds into gold-related investments. Coincidently, gold bullion was also trading at about $700.00 per ounce in November 2007. Michael’s message was to trade each $700.00 share of Google into $700.00 of gold, because he saw gold as a much better investment.