The Dow/Gold ratio chart (courtesy of Sharelynx) makes for interesting discussion. In fact, at first glance, it makes me want to load up that hollowed out tree trunk with more gold bars, or dump all of my current stocks and return to the dark side of the jungle with my blow dart gun and merry band of poison dart frogs.
You'll have to pry that blow dart gun from my cold dead hands as the NBDGA says. That would be the National Blow Dart Gun Association, of course.
I'm not sure if there is any logical reason that the Dow/Gold ratio will head back down into the 1 to 2 range although charts like this have a tendency to stir the imagination. I could point out thousand of charts that gave indications of future direction based on the some technical signal or pattern only to do the complete opposite leaving the technical analysis tea leaf readers scratching their heads. This really aggravates the lice.
As of right now, the Dow 13,254.29 divided by the current price of one ounce of gold which is 1731.09 equals 7.65. So right now it would take 7.65 ounces of gold to buy one share of the Dow. I don't make a habit of prediction on this site (I'd wink if I knew how) but I do have my opinions regarding the future direction of this chart.
Simply put, I believe, (based on a combination of the way all the letters lined up in my alphabet soup, and a certain, recent seven-year market volatility cycle), that the ratio will break below 5:1 sometime in the year 2015. This will be good for gold, bad for the Dow.
As Mr. Mojo Risin once sang...
Five to one, baby
One in five
No one here gets out alive, now
You get yours, baby
I'll get mine
Gonna make it, baby
If we try
The lizard monkey has spoken. Now, enough of this prognosticative voodoo and let us return to our regularly scheduled, QLD loving, MensaMonkey programming.
