Authored by Bryan Lutz, Editor at Dollarcollapse.com,
It takes about 13 ounces of gold to buy the Dow Jones Industrial Average. The Dow-to-gold ratio prices the entire American stock market. And it does it in the one currency no central bank can print. Over the past century, it tells the same story.
It measures when the US stock market is overvalued… when it’s promising too much.
And there are a lot of promises that don’t look as good as they should these days.
A bond pays only if the issuer stays solvent.
A dollar holds its value only if the people who print it show restraint.
Yet, tangible wealth answers to no one. An ounce of gold is worth an ounce of gold whether a single counterparty keeps their word, which is what makes gold an honest denominator in the Dow-to-Gold ratio.
The ratio goes up, and it comes down. During the great manias of the twentieth century, paper looked invincible: 18 ounces to buy the Dow in 1929, 28 in 1966, 41 at the top of the dot-com boom in 2000. Then the tide went out, bubbles popped and the markets turned to commodities over equities.
As the ratio goes down, eventually it hits a bottom.
The same Dow cost almost nothing in metal, barely 2 ounces in 1932 and close to a single ounce in 1980. So, greed priced the top. Fear, and sound money, priced the bottom.
A century in one line:
Every peak in paper has been repriced in gold.
Each top marked a moment the market trusted claims more than the t
