Gold prices broke the $1,000 mark again and have been hovering around that mark for some time (today’s spot price is $991.91), this is making headlines as people comment on ‘record highs’ that the metal has reached in nominal terms (no inflation factored in), if you adjust for inflation the current price would need to be c. $2,500 to match the $850 peak reached in January 1980.
The Dow/Gold ratio is currently 9.7 historically during a crash you would see gold prices surge, the peaks in the graph below are the low points of gold prices/high Dow, and you can see that in the past (c. 2000) it would have taken 40 oz of gold to buy the Dow, the historic average was around the 5 or 6 oz mark which would mean either the Dow is overpriced or gold is under priced, a ratio of c. 6 would put gold at a price of $1,605 (Dow at 9630) and at 5oz would price gold at $1,926. The hidden aspect …