Dow/Gold

[vand]

Keeping an eye on this important ratio.

Dow/Gold is now 13, fallen from its recent high of 17. 
http://www.macrotrends.net/1378/dow-to-gold-ratio-100-year-historical-chart

In my opining the main part of the bull market when institutional investors come in will start when Dow/Gold is below 10 and will run until we fall below the 2011 level around 6, when the "public awareness" phase really takes off, eventually leading to a mania phase in the low single digits.

[KDave]

Keep us updated, I am all for any indicating ratios that tell us when to sell, the silver to gold ratio is also useful for telling you when to sell both metals. 

[ApisMellifera]

Yep I also just learned about this one and keep an eye on it.

These are the measurements that I've read, so far;

DSR Dow-Gold Ratio

DSR >10    : Dow overvalued and Gold undervalued
DSR 6-7    : Dow is fairly valued
DSR <4    : Dow is undervalued and Gold overvalued

(In the short-term) I think we all know that the recent best time to buy PM was in Nov/Dec 2015. The DSR also confirmed that, if you zoom in the 5 year chart. However I still think it's relatively a good time to buy PM's  [ ? ]

 

Just a hypothetical 'dream' example would be this :

In 1980 the DSR was around 1 (one)
So you could've bought 1 'Dow Share' for 1 oz.

In 2000 DSR was around 40, which meant you could've sold that one 'Dow share' and buy 40 oz of gold!

I'm also looking for a Property-to-Gold Ratio and haven't found one yet. So am starting to collect data to make my own.

[HelpingHands]

@ApisMellifera

 

[HighlandTiger]

To be honest, these sort of ratios are a self fulfilling prophecy. When shares fall, people rush into PM's, and vice versa. I expect you'd see the same patterns with any share index v gold prices.

However trying to attach an arbitary figure to decide when something is good or bad value, based on historical trends is dangerous in my opinion.

The world is completely different today than in the past. In 1985, the last time the index was 4, was pre the digital revolution. A revolution which changed how shares are bought and who can buy them. It also created an industrial market for gold and silver in electronic components. If you'd mentioned Quantative easing then, people would have thought you were talking about Prune Juice. I believe all bets are off when it comes to future values of anything and everything, past results will mean nothing, and those people who obsessively rely on charts to make their financial decisions, will miss out on some hefty profits. 

[ApisMellifera]

I agree. I try not use the charts/TA to 'predict' the future or rely on it but like to learn and study it at the moment. I like to use TA to measure where the markets are now and today, to form my own unbiased and factual view without the "noise" of the news/media ( no disrespect to ya’ll )

I’m still in stacking mode whatever the charts say and more into transfer my fiats into PM's. I do appreciate the warnings/concerns about TA and I just would like the forum to continue the debate for everyone to learn and discuss .

I see TA like predicting the weather. We ‘really’ don't know what the weather is going to be like today or tomorrow however we do know when the seasons is going to change and how to prepare/dress ourselves accordingly. A farmer also knows how to get a good yield by utilising the seasons correctly. People can also study/follow/utilise the “seasons” of any (financial) market and TA is just another tool in the shed to prepare for the upcoming season changes. (ok ok, you can argue that the weather is also changing with geo-engineering etc).

Yes, QE is most definitely distorting the markets, also the Dow and FTSE. I think it would useful to learn from “past performances”. QE, has been done over and over throughout history and is not a new practice, I think QE is just the modern day version of 'coin debasement' with a twist, https://en.wikipedia.org/wiki/Debasement Coin debasement goes way back to the Roman empire and for example John Law applied “QE concepts” in the 18th century in France with disastrous effect https://en.wikipedia.org/wiki/John_Law_(economist then we had the hyperinflation of the Weimar Republic in the 1920-1930ish and most recently Zimbabwe crisis in 2008, partly resulted by QE (?). So I think that TA is still a relevant tool but should not solely rely on.

Anyways that's my 2 pence… J