In the chart from yesterday's post on the Dow/Gold relationship, you will notice that right in the middle of a major increase in the purchasing power of Gold - from 1970-1980 - there was a huge correction. Between 1970 and 1974, Gold had moved past the mean to 3oz per Dow share, and then between 1975 and 1976, gold over-corrected the other way to 7oz per Dow share.What followed was a HUGE move in favor of gold. By 1980, the Dow/gold ratio was 1:1! (hint: that was the time to sell gold and buy the Dow).
So the answer to our question today is: perhaps. There really is no telling what will happen in the short term with any commodity or stock. "Sure Bets" can turn on a dime in these markets, and it is the short term traders that will get the brunt of the pain. Long-term investors, however, don't care about this market noise, because we are focusing on the fundamentals of the market, not on the technical indicators from day-to-day.
In our fast-paced, instant everything culture, waiting 2 years to see a return is like waiting a lifetime. But we must have patience, and use volatility to our advantage. Doing this, we will be able to thus pick up great, well managed commodity equities at bargain basement prices in the current environment. As I just checked, Market Vector's Gold mining index just hit ANOTHER 52-week low.
The Gold Bull Run
To the average trader or observer, recent events (since last October especially) might mean that the bull run on gold is either over, or is soon to be finished. But even a cursory analysis of the Gold/Dow ratio tells us that we are no where near the end of this Gold bull run, and we are merely experiencing what is actually quite a normal, albeit violent, correction.
The most important thing going forward will be to stake a claim on some physical bullion, either Gold or Silver, and perhaps even some platinum and palladium. Stay away from collector coins and rare coins, and only buy what you can afford out of pocket. Once the Dow/Gold ratio bottoms out, THEN it will be the time to sell gold and buy the dow (or banks, or the S&P500 etc) ... and not a moment sooner.
Make no mistake -- with the insane levels of central bank currency printing across the western world, the Gold/Dow ratio is more likely to bottom out at a fraction of an ounce, than it is to be bottoming out now. Why? Because as more currency is introduced into the market, the value of all other currency that per-existed, the new currency units are devalued.
It is always best to do your own due diligence in learning about macro economic trends. Don't take my word for it. In the coming days, I will be digging up resources (some free, some not) for readers to sink their teeth into. It is my hope that we can all benefit from understanding the economic cycles.
So the answer to our question today is: perhaps. There really is no telling what will happen in the short term with any commodity or stock. "Sure Bets" can turn on a dime in these markets, and it is the short term traders that will get the brunt of the pain. Long-term investors, however, don't care about this market noise, because we are focusing on the fundamentals of the market, not on the technical indicators from day-to-day.
In our fast-paced, instant everything culture, waiting 2 years to see a return is like waiting a lifetime. But we must have patience, and use volatility to our advantage. Doing this, we will be able to thus pick up great, well managed commodity equities at bargain basement prices in the current environment. As I just checked, Market Vector's Gold mining index just hit ANOTHER 52-week low.
The Gold Bull Run
To the average trader or observer, recent events (since last October especially) might mean that the bull run on gold is either over, or is soon to be finished. But even a cursory analysis of the Gold/Dow ratio tells us that we are no where near the end of this Gold bull run, and we are merely experiencing what is actually quite a normal, albeit violent, correction.
The most important thing going forward will be to stake a claim on some physical bullion, either Gold or Silver, and perhaps even some platinum and palladium. Stay away from collector coins and rare coins, and only buy what you can afford out of pocket. Once the Dow/Gold ratio bottoms out, THEN it will be the time to sell gold and buy the dow (or banks, or the S&P500 etc) ... and not a moment sooner.
Make no mistake -- with the insane levels of central bank currency printing across the western world, the Gold/Dow ratio is more likely to bottom out at a fraction of an ounce, than it is to be bottoming out now. Why? Because as more currency is introduced into the market, the value of all other currency that per-existed, the new currency units are devalued.
It is always best to do your own due diligence in learning about macro economic trends. Don't take my word for it. In the coming days, I will be digging up resources (some free, some not) for readers to sink their teeth into. It is my hope that we can all benefit from understanding the economic cycles.
