Gold investors take note: the fourth major turning point in the Dow-to-Gold ratio has arrived. This rare, powerful, and cautionary signal has only occurred three times in the past 130 years, and it is now appearing once again.
This signal indicates that gold is poised for several years of sustained appreciation, while holders of industrial stocks like the Dow Jones Industrial Average and the S&P 500 may face years of losses. The significance of this signal is immense; it will be the most crucial decision-making tool for precious metals investors in the coming years.
The Dow-to-Gold ratio measures the number of ounces of gold required to buy one share of each of the 30 component stocks in the Dow Jones Industrial Average. The Dow was created in 1896 by Charles Dow and Edward Jones to gauge the performance of the U.S. economy. Gold's history stretches back to ancient times; it has been used as a store of wealth for at least five millennia and likely for ceremonial purposes for thousands of years prior. In essence, the Dow-to-Gold ratio clearly shows which core asset is appreciating faster: industrial company stocks or the ancient store of wealth, gold.
The following chart illustrates the ratio's trajectory since its inception, clearly displaying the four major turning points that have occurred over the past 130 years. First, let's review the three previous key turning points to understand the deeper signal behind this fourth one.
The first turning point occurred from 1930 to 1933. Following the establishment of the Federal Reserve in 1913 and post-WWI economic prosperity, a perfect environment for industrial growth emerged, fueled by cheap capital from the new central bank and a peacetime boom. The "Roaring Twenties" were essentially a result of strong economic fundamentals combined with the Fed's ability to inject new currency into the U.S. market. The Dow-to-Gold ratio rose from 3.0 in 1921 to a peak of 18.6 in 1929, meaning the Dow outperformed gold by a factor of 6.2. This reflected both real U.S. economic growth and speculative fervor fueled by monetary stimulus. However, the trend could not continue indefinitely. By 1929, with sky-high valuations and rampant speculation, the stock market peaked and began a four-year decline. Ultimately, from the 1929 peak to the 1933 low, the Dow's value relative to gold collapsed by 90%, erasing all the gains of the 1920s. Gold not only held its value but was officially revalued in 1933 via the Gold Reserve Act, with its price rising 75% from $20 to $35 per ounce. Consequently, by 1933, gold holders could purchase ten times more industrial stocks than in 1929—a tenfold increase in relative wealth in just four years.
The second turning point unfolded from 1968 to 1980. After the Great Depression and WWII, the ratio climbed from 1.9 in 1933 to a peak of 24.5 in 1966. Over 33 years, the Dow outperformed gold by a factor of 12.9, an era that welcomed the computer age, commercial aviation, and space exploration. However, the unsustainable costs of the Korean and Vietnam wars, alongside increased domestic social spending, led to soaring U.S. debt. By 1966, after the ratio peaked at 24.5, America's foreign creditors began questioning its debt sustainability. The U.S. was forced to abandon the gold standard established during the Great Depression, and in 1971 the dollar became a purely fiat currency, with gold becoming freely tradable in the U.S. for the first time. From 1971 to 1980, the price of gold surged 24-fold from $35 to $850, while the Dow experienced multiple deep corrections of 40-60%. The ratio fell from 24.5 in 1966 to 1.0 at gold's 1980 peak, meaning the Dow's value relative to gold collapsed by over 95% in 14 years. Gold holders in 1980 could buy 20 times more Dow stocks than in 1971—a twentyfold increase in relative wealth over nine years.
The third turning point spanned from 2002 to 2011. Driven by the personal computer, mobile phone, and internet booms of the 80s and 90s, the ratio skyrocketed from 1.0 to 45.0 by August 1999—the Dow outperforming gold by 45 times in just 20 years. But the speculative mania of the dot-com bubble was unsustainable. Gold, considered a "dated asset" since its 1980 peak, had fallen from $850 to $250 by 1999, marking the start of the third turning point. The early 2000s were turbulent: the 9/11 attacks, wars in Afghanistan and Iraq, and the 2007-2009 Global Financial Crisis. Central banks printed money largely to bail out "too-big-to-fail" institutions and fund the wars. During the crisis, the Dow plunged nearly 60%, while gold rallied from $250 to over $1,900 by 2011. The ratio fell from 45.0 to 5.7, a 87% decline in the Dow's value relative to gold. Gold holders in 2011 could buy 7.9 times more Dow stocks than a decade prior, a period of wealth transfer from industrial stock holders to gold holders.
The fourth turning point is now underway, starting and continuing into the present. The chart's importance cannot be overstated. After precious metals peaked in 2011, AI and crypto speculation dominated the next decade, while gold was largely forgotten, trading below its 2011 high until 2024. The ratio climbed from 5.7 in 2011 to a peak of 22.5 in 2018, with industrial growth nearly quadrupling that of gold. But gold was not forgotten for long. As U.S. and global debt concerns accelerated, gold prices surged suddenly in March 2024, more than doubling over the past two years. As of the writing of this article, the gold price hovers above $4,500 per ounce. Crucially, the fourth turning point in the Dow-to-Gold ratio has been officially confirmed. The chart clearly shows the breach of the blue trendline that began in 1980.
In the ratio's history, this signal has only appeared three times before. Following the first turning point in 1930, the Dow fell 90% relative to gold over 4 years. After the second in 1968, it fell 95% over 14 years. Following the third in 2002, it fell 87% over 10 years. Averaging these three, the Dow tends to fall 90.5% relative to gold over 9.3 years. From the recent 2018 peak of 22.5, a 90.5% decline implies the ratio could fall to 2.1. With the current ratio at 10.9, this target suggests further declines of over 80% for the Dow relative to gold in the coming years. These figures are merely averages. The technical analysis maxim holds: the longer a trend persists, the more significant its break. The current cycle has broken a 45-year trend, far exceeding the previous cycles: 9 years for the first break, 24 for the second, and 22 for the third. The average previous trend duration was 18.3 years; the current break is 2.5 times longer, suggesting this fourth turning point could be the most significant yet, with a decline potentially exceeding the historical average.
Projecting targets conservatively based on the average 80% decline to a ratio of 2.1, with the Dow at 48,700 and gold at $4,500/oz, this relative decline could manifest in three scenarios. In a deflationary crash, gold stays at $4,500 while the Dow crashes 80% to 9,740. In a stagflation scenario, gold rises 122% to $10,000 while the Dow falls 57% to 21,000. In an inflationary scenario, gold soars 670% to $34,700 while the Dow rises 50% to 73,000. In all cases, the Dow's purchasing power relative to gold falls by 80%, or conversely, gold's purchasing power relative to the Dow increases fivefold. Remember, these are based on averages; the longer trend formation suggests the ratio could fall well below 2.1, implying even greater gains for gold.
The core conclusion is that the fourth turning point is confirmed. Price action incorporates all known information, and this signal indicates that, medium-term, the severity of global debt problems outweighs economic growth potential. The data suggests the Dow will fall at least 80% relative to gold, or gold will rise at least fivefold relative to the Dow. The market's message is clear: despite breakthroughs in AI, medicine, space, and nanotech, U.S. and global debt is the core near-term conflict. Only after debt issues are addressed can technological progress fully accelerate. As in the 1970s, when breakthroughs occurred alongside pressing debt, technological advancement will continue, but gold will likely significantly outperform the Dow. The core signal is that entrenched global debt must be prioritized. In the fiat era, governments often resort to printing money to mask problems, debasing currencies and causing gold—an ancient store of wealth beyond the control of politicians and central banks—to rise in price. This is not theoretical; it is happening in real-time price action.
From now until the fourth turning point plays out, investors should overweight precious metals, including gold, silver, and mining stocks. Over the next several years, investors positioned correctly in precious metals will experience a generational wealth transfer opportunity. The next cycle will present an excellent time to buy industrial stocks—but only after Dow components fall at least 80% in valuation relative to gold. "One correct decision in life can completely change your destiny." The era for gold has arrived.
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