This will give a clear idea as to how this ratio has moved historically. Below is my opinion on why I feel that Dow-Gold ratio will touch one and why I also feel that it will be gold that will go ballistic in the long term leading to this ratio touching one.īefore I proceed, I would like to present a 200 year Dow-Gold chart for readers. So, if the Dow-Gold ratio has to touch one, either gold will go ballistic in the long term or the Dow Jones Index will crash very significantly. If we consider today's index value and gold prices then:ĭow-Gold Ratio = Value of Dow Jones / Value of Gold in Ounce = 8763.13 / 962.60 = 9.10 In very simple words, the Dow-Gold ratio tell investors how many ounces of gold is needed to buy one Dow Jones Industrial Index. With the help of the Dow-Gold ratio, I will also show how US stock markets have crashed post 2000, even when they went up in dollar terms from 2003-2008. Federal Reserve Bank of St.In this article I will discuss the Dow-Gold ratio and if the Dow-Gold ratio will touch one in the near term.Excel Calculation for the S&P 500 Total Return since 1871.

Online Data Robert Shiller: long term stock, bond, interest rate and consumption data.Both indices are capitalization-weighted and both are considered benchmarks for large-cap stocks. While the S&P 500 includes 500 companies, the Wilshire Large-Cap includes 750 companies. For this reason the S&P 500 Total Return from 1871 until 1977 was calculated based on Robert Shiller's data and added to the Wilshire index. Unfortunately, the Wilshire Large-Cap only dates back to 1978. Therefore, it includes all capital gains and it allows for an accurate performance comparison with Gold and Silver. In contrast to the S&P 500 Price Index and the Dow Jones, the Wilshire Large-Cap is a total return index, in which all resulting cash payouts (including dividends) are automatically reinvested back into the fund itself. Investopedia: Dow Jones Industrial Average - DJIA.Investopedia: Standard & Poor's 500 Index - S&P 500.Longermtrends: Dow to Gold ratio since 1792.Including dividends leads to a very different picture, which is demonstrated in the chart below. Therefore, they do not include dividends. Both versions of these indices are price indices in contrast to total return indices. For these reasons it is more representative of the US stock market than the Dow Jones. The S&P 500 consists of 500 large US companies, it is capitalization-weighted, and it captures approximately 80% of available market capitalization. It is one of the oldest and most-watched indices in the world. The Dow Jones is a stock index that includes 30 large publicly traded companies based in the United States. Which was the best investment in the past 30, 50, 80, or 100 years? This chart compares the performance of the S&P 500, the Dow Jones, Gold, and Silver.

Gold vs dow chart