It's no secret that the stock market runs in cycles, but it seems that people tend to run with a herd mentality when it comes to investing in the stock market. Whatever the prevailing sentiment of the day happens to be, that is what most people will put their money into whether the tech stocks of 2000, the gold of 1980, or the index ETFs of today.
There is a well documented secret to successful investing, that not many people want to, or seem to, listen to. That secret is the Dow/Gold ratio. This ratio is easy to calculate: simply divide the price of the Dow Jones by the price of Gold on any given day, and you will get how many ounces of gold it takes to by the Dow Jones.
Historically, the mean is between 5-7 oz of Gold to buy the Dow (left hand side of the chart below), but as you can see from the chart below from http://www.macrotrends.org, the ratio tends to overshoot the mean by a fair bit in either direction. As of today, we are sitting at a Dow/Gold ratio of about 7, which indicates fair value. However, in a bigger sense, we have been approaching this fair since the Dow peaked against gold 10 years ago. At that time, the ratio had over shot the mean in favor of the Dow by a monstrous 35 oz of gold.
Now it will be Gold's turn, and thus now is also the time to be investing in commodities in general. When the trend bottoms (it's hard to tell when this might happen, given the insane money printing by world governments), it will be time to sell commodities and buy back into general equities. From a really basic technical standpoint, there is a chance that fractions of an ounce of gold will buy the Dow before the current trend reverses.
There is a well documented secret to successful investing, that not many people want to, or seem to, listen to. That secret is the Dow/Gold ratio. This ratio is easy to calculate: simply divide the price of the Dow Jones by the price of Gold on any given day, and you will get how many ounces of gold it takes to by the Dow Jones.
Historically, the mean is between 5-7 oz of Gold to buy the Dow (left hand side of the chart below), but as you can see from the chart below from http://www.macrotrends.org, the ratio tends to overshoot the mean by a fair bit in either direction. As of today, we are sitting at a Dow/Gold ratio of about 7, which indicates fair value. However, in a bigger sense, we have been approaching this fair since the Dow peaked against gold 10 years ago. At that time, the ratio had over shot the mean in favor of the Dow by a monstrous 35 oz of gold.
Now it will be Gold's turn, and thus now is also the time to be investing in commodities in general. When the trend bottoms (it's hard to tell when this might happen, given the insane money printing by world governments), it will be time to sell commodities and buy back into general equities. From a really basic technical standpoint, there is a chance that fractions of an ounce of gold will buy the Dow before the current trend reverses.
