By Ryan McGuire
Some analysts, and even some really good analysts are predicting that Gold is near the end of it's secular bull run. Furthermore, these analysts are predicting that commodities are at the end of the secular commodities bull market that began at the same time Gold's bull took off in 2001.
Here's the deal though - if you look at the Dow/Gold ratio, since the Fiat capital Era (that is, since the invention of money that was merely anchored to something rather than money being a hard asset itself), the ratio of how much gold it takes to buy one share of the Dow Jones Industrial Index has increasingly become more volatile.
Currently, we find ourselves just outside of the 75% confidence rate. Most notably, you can see that during the era of Fiat capital the ratio has tended to overshoot the 75% confidence band by a large margin. This means that investors jumping into the gold space now are more than likely not too late.
There is always a chance that things will reverse, but given the immense risks to the global economy that exists, most specifically the fact that world governments are printing money like crazy in order to service unsustainable levels of absolute debt, we have not seen the bottom of the Gold/Dow ratio (meaning we may see a time where it takes less than an ounce of Gold to buy the Dow).
Side note: Dow theory is signalling that the current dip might be a good place to add to positions for short term gains in the next few months. I'm getting increasingly sketchy on the mid-term outlook for the stock market. As a result, I am ready to raise capital whenever the opportunity arises, and as counterproductive as this sounds for a gold investor, I am considering purchasing a bond fund ... but only because this is what most of the 'smart money' will be doing if the stuff hits the fan in the next couple of months. It's impossible to argue with the 'smart money', even if I believe that they are absolutely misguided.
