This chart from technician John Roque shows periods of Dow/Gold ratio. The first two bold blue lines highlight the 14-year periods when gold outperformed the DJIA (1928-1942 and 1965–1979). The current third bold line shows that gold has been outperforming the DJIA since 1999 – implying we are ½ way through this cycle.
DJIA / Gold Relative Ratio, Annual Data from 1896
Source: Natexis Bleichroeder
Roque notes that the long term average for this ratio is 9.5 and as of March 31, its 18.9. The current cycle could run to ~2013 or until this ratio gets down to the single digits like. Either way it looks like gold (and commodities) have further to go.
I should have more on this in a related research project in a few weeks . . .
Quote of the Day:
“English stocks are springing up like mushrooms this year, forced up to a quite unreasonable level, and then, for the most part, collapse. In this way, I have made over 400 pounds. [Speculating] makes small demands on one’s time, and it’s worthwhile running some risks in order to relive the enemy of his money.”
–Karl Marx (from 1864 letter to his uncle)
Note: this info was emailed to clients on April 18, ~noon