Saturday, January 19, 2008
It's time to look at the most important chart in the world again. That's right the Dow:gold ratio. We see the 16 level has fallen and we are now down in the 13 range. That means that it takes 13 oz. of gold to buy one share of the Dow. In 2000 it took 42 oz. of gold to buy one share of the Dow. Anyone who thinks that we have been in a bull market for paper assets since 2002 is fooling themselves. We are and continue to be in a secular bear market for paper and a secular bull market for hard assets. Historically this trend will not change until the Dow and gold are selling close to parity. Gold just broke out to new highs. The average gain for a commodity after it breaks out to new all time highs is roughly 180%. That puts gold in the $2500 range. It won't get there over night and there will be scary shakeouts but I have no doubt that it will get there. As a matter of fact I suspect it will double that. At some point in the future we will most likely see gold and the Dow trading in the $5000 range. There are going to be millionaires made in the coming years for the investors that can ride this bull. Those that get repeatedly bucked off are going to miss the boat. Saddle up cowboys and cowgirls and prepare to hold on tight because you ain't seen nothing yet.