Wednesday, July 14, 2010

What the Dow/Gold ratio means for the stock market and gold

Dow/Gold ratio will ultimately reach 1:1. Dow is currently around 10,000. Gold is around $1200.
This would mean either:
1) if gold goes no where from here, an ultimate collapse in the Dow by 90%
OR
2) if the Dow goes nowhere from here, an ultimate rise in the price of gold by 900%.

Clearly, gold would be the preferable asset class in whichever scenario unfolds in the future.

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