The Dow Priced in Ounces of Gold: Secular Bear Market Since '99

|
Includes: DIA, GLD, IAU
by: Kirk Lindstrom

When measured in ounces of Gold, the DOW has been in a secular bear market since peaking in late 1999.

click to enlarge

A chart of the DOW Jones Industrial Average (DJIA Charts) priced in gold shows the markets are not as healthy as one might think due to the decline of the US dollar.

  • Back in 1999, it took 45 ounces of gold to buy the DJIA.
  • Today it only takes 12.33 ounces of gold to buy the DOW!

Cutting the Fed Funds target rate from 6.50% in January 2001 to 1.0% in June 2003 may have inflated the US stock market out of its bear market when priced in dollars but it had consequences that we are feeling today.

CDs have been a "safe haven" for those wishing to preserve assets and get a small inflation adjusted return. See "Very Best CD Rates with FDIC" for a list of the best rates and terms. You can get over 5% at Discover Bank if you are willing to tie your money up for five years. You can get a one year CD paying 4.25% at Wachovia Bank (NASDAQ:WB).

Cutting interest rates to get the US out of a recession may have worked but the inflation in commodities and devaluation of the US dollar it caused has caused pain for the US consumer. This pain is often blamed on president Bush who took office just as the DOW/Gold ratio broke out of the "symmetrical triangle" pattern.

More, older Dow/Gold Charts courtesy of www.kitco.com and www.marketoracle.co.uk

With the DOW:Gold ratio now at 12, it is trading at the bottom of the green zone in the second chart.

Chart of the Day observed:

 It is also interesting to note that the magnitude of the current bear market (when adjusted for inflation) is approximately 60% of what occurred during the dot-com bust of 1999 to 2003."

Disclosure: None