Technical analyst John Newell charts the Dow-Gold ratio and speculates on where it could be heading.
The Dow/Gold ratio broke a trend-line in past few weeks that could be signaling that gold could be trending higher against the Dow Jones Industrial Index in the next 18 months to two years.
An example might be a ratio of 10 or the Dow at 20,000 and gold at $2,000 (a new all-time high in U.S. dollars) equals 10.
Conversely, if the Dow went to 30,000 and gold went to $3,000, the ratio would equal 10. This is not a prediction but an observation.
What I found interesting was in the mid-1970s gold corrected from ~$200 to ~$100 and the Dow/Gold ratio went up ~260%, as it did again from the 2012 lows into mid-2019 but over a longer period.
John Newell is a portfolio manager at Fieldhouse Capital Management and president and CEO of Golden Sky Minerals Corp. He has 38 years of experience in the investment industry acting as an officer, director, portfolio manager and investment advisor with some of the largest investment firms in Canada. Newell is a specialist in precious metal equities and related commodities and is a registered portfolio manager in Canada (advising representative).
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