Dow gold ratio

The ratio through history

• 1929: about 18, just before the crash, with gold fixed at $20.67.
• 1932–1933: about 2, at the bottom of the Depression.
• 1966: about 28, a peak for stocks against gold.
• 1980: about 1 to 1.3, when gold spiked to $850 and stocks were cheap.
• 1999: over 40, the all-time high, at the top of the dot-com boom.
• Today: 12.9.

Historical figures are approximate; sources differ on exact values and dates.

How to read it

A high ratio means stocks are expensive measured in gold; a low ratio means gold is expensive measured in stocks. Over the last century it has swung between those extremes in long waves, which is why some investors use it to decide when to favor one over the other. It says nothing about timing, though: the ratio can stay high or low for years. It also ignores dividends, which stocks pay and gold doesn’t.

Questions

What is the Dow to gold ratio today?

The live figure at the top of the page: the Dow Jones futures price divided by the spot price of gold.

What is a high Dow/gold ratio?

Above about 20 has historically meant stocks were richly valued against gold; the 1999 peak was over 40.

Is the Dow/gold ratio a good timing tool?

Not on its own. It shows long cycles, but it can sit at extremes for years, and it leaves out dividends.

Why use the Dow and not the S&P 500?

Mostly history: the Dow goes back to 1896, so the ratio covers more cycles. The S&P 500/gold ratio is in the stats above.

Sources

• GoldSilver: Dow to gold ratio, 100 years of history
• Crossing Wall Street: the Dow-to-gold ratio since 1968
• Fuller Treacy Money: the Dow/gold ratio