Monday, February 16, 2009
Dow to gold ratio update
The dow to gold ratio continues to trend lower and is now under 9. I cannot stress enough how certain it is that this ratio will go below 2 and I believe it will fall below 1 on this trip into the basement.
This chart is my long-term road map and I will not be even considering selling any of my physical gold until this ratio is well under 2 and I will probably not seriously consider it until the ratio reaches parity (i.e. 1). If the deflationary collapse continues as anticipated, this will likely be at a gold price in the $1500-$2500/ounce range. Those that doubt, watch history in the making and learn something you can teach your kids and grandkids to use. This concept will remain valid until we learn from our fatal global monetary mistake and abandon fiat currencies.
Anyone who still thinks a ratio of 1 could not possibly be reached is in denial, has been living under a rock the last 6 months, or smokes too much happy crack. Staying in the stock market "for the long haul" is asking to have your money taken from you. Gold hasn't even reached the frenzy stage where the public stampedes into it, although fairly quiet institutional buying is already well underway.
It is definitely not too late to buy and hold physical gold as an asset protection mechanism. A current ratio just under 9 indicates that stocks have a long way to fall and gold has a long way to rise before parity is achieved. I still believe a a gold price drop is imminent and this will provide another great buying opportunity in the $820/ounce or lower price range. When it occurs, don't hesitate - BUY!