Gold/Dow Jones Ratio (Gold's Real Value Indicator)

     In the logarithmic scaled graph below, the price changes of the Dow Jones Index and gold metal from the beginning of 1972 to the present time can be monitored simultaneously. The black curve shows the ounce price of gold, and the blue curve shows the Dow Jones Index.

     While gold and Dow Jones returns were equal to each other in the 2nd, 4th and 6th green circles, gold had a higher return in the 1st and 5th circles and the Dow Jones Index had a higher return in the 3rd circle.

     The first circle shows the situation in September 1980. Here, the return of gold had exceeded the return of the Dow by 6.80 times. In the third circle, in January 2000, the return of the Dow exceeded the return of gold by 4.15 times. In the fifth circle, we see that gold once again made a higher return and exceeded the Dow Jones return by 85%, that is, by 1.85 times.

     After the 6th circle, where the Dow Index and gold ore returns were equalized, the Dow Jones Index managed to provide more returns than gold. Today, the difference between them is 1.53 times in favor of the Dow Jones Index. In January, there was a difference of 1.62 times. In other words, gold is on its way to catching up with the Dow Jones Index in terms of return.

     I would like to make my first prediction about the future price of the gold on the graph above. I think that the return of black painted gold curve will first catch up the return of the blue painted Dow Jones Index curve until 2027, and then exceed it by at least 1.5 times. In this context, I expect the Dow Jones Index to fall to levels of 36 thousand and the price of gold to rise to around $5,500.

     Pay attention to the gold scaling in the left column and the Dow Index scaling in the right column. There is a 10-fold difference between them.

     Now it is time for our unique and beautiful graph, which I love very much. Here we have compared the returns of gold and Dow Jones Index to each other. The circles marked 1-7 are in harmony with the previous chart.

     Circles numbered 2-4-5-6 show the periods when Dow and gold returns were equal or close to each other. In circle number 1, gold had higher returns, while in circles number 3 and 7, Dow Index had higher returns.

     Going below the zero line shown in orange color means that Dow Jones Index return is higher. Going above it shows that gold return is higher.

     I am making my second prediction in the last chart below which I extended to 2027.

     In my first prediction, I expressed my expectation that the Gold/Dow Ratio would rise to 1.50 and the gold price would reach $5,500 within this scope. My second prediction is that, for a slightly more distant future, gold return could exceed Dow Jones Index return by 2.0 times. If this happens, the Dow Jones Index will be around $45,000, while the price of an ounce of gold could reach $9,000.