Given all the talk about money printing, inflation and the devaluation of the dollar, you'd think more investors would be hungry to get a hold of an alternative measure of stock prices that was devoid of currency impacts.
Even though the Dow-Gold Ratio has always been followed, it's still fairly obscure and doesn't get much attention. But some say the time is right to take a look, including hedge fund manager JC Parets, the founder and president of Eagle Bay Capital and senior editor of AllStarCharts.com, who calls its 20-year performance "the strongest trend on earth."
"I don't know anything stronger," Parets says in the attached video. "Since 1999 this thing has been just crushing, literally."
As the chart below reflects, the slumping ratio wasn't always a single-digit affair. In August of 1999, the ratio peaked out at 44, meaning it took 44 ounces of gold to buy 1 share of the Dow Jones Industrial Average.
Dow / Gold Ratio
Prior to that, it enjoyed a 20-year ascent, climbing from 1-to-1 in 1980 to the aforementioned peak of 44.
"In 1980 a share of the Dow bought you an ounce of gold. They were the same price," Parets says, pointing out that the current ratio reading of about 8 is up from 6 last year when gold hit a record high, but more importantly, he says it's still a long way above the record low still.
"We're nowhere near historic lows of 1:1. If you do the math, we have a long way to go from 8:1," he says. "We're looking for gold to outperform the Dow and think the path of least resistance in gold is higher."
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