When to Sell Gold and Buy the Dow Jones

Everyone thinks the stock market is doing well…but look what it has done in terms of real money – gold. Richard Russell reminds us that you could have bought an ounce of gold on January 18th, 1980, for US$835. On that same day, the Dow was only a little higher, at 867. In other words, you could have bought almost the entire Dow for one ounce of gold.

Oh, if only we had been around then to give you a Trade of the Decade – sell gold, buy the Dow. You could have watched your stocks go over 13,000…while gold fell below US$270, at which point you could have traded your Dow stocks for 43 ounces of gold! What a trade!

Unfortunately, the Internet hadn’t been invented…Markets and Money hadn’t been imagined…and your editor hadn’t the sense to make the call anyway. He was convinced, along with the rest of the gold bugs, that gold would keep going up. He was, of course, dead wrong. Gold fell and the Dow rose…not just for one decade…but for two!

But 20 years is a long time to suffer a bear market in your favourite commodity. It gives a man a reason to think…and time to do it. If he is still solvent…and still compus mentis…at the end of it, he has a great advantage over other mortals. He has made such a huge mistake for such a long time that the law of averages begins to work for him. Nobody can be that stupid forever.

Finally, the porch light comes on. ‘Hey…’ he says to himself. ‘Markets go up…and down.’

And so, with the confidence of the recently humiliated, your editor gave his legendary Trade of the Decade signal in January 2000: sell the Dow, buy gold. Since then, price of gold has more than doubled…and the Dow has edged up a tiny bit. Instead of getting 43 ounces of gold for the Dow, today, you will not even get 18.

We are only about half way through this cycle, we reckon. The Dow and gold will meet again, somewhere in the future. Probably somewhere in the middle – around 7,000…when investors have been turned off to US stocks, and the Dow has sunk…and when speculators have bid up the price of gold to dizzy heights.

Then, trust us this time, dear reader, we will remember to give the ‘sell gold, buy the Dow’ signal. At least, we hope so.

Bill Bonner
Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.
Bill Bonner

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7 Comments on "When to Sell Gold and Buy the Dow Jones"

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Hugh Burgett
Why do people want to own something that gives them nothing, stocks may be over valued, over priced , but they do give a dividend usually. Even when stock prices turn to dust if the world turns there may be some income. Gold on the other hand has value if somebody else wants it, when times get bad would you prefer to trade something of practical value, food or fuel, can you swipe a gold bullion in a atm, when you need to access this asset how will you do it travel to Perth, Switzland to chisel some off to… Read more »

Hugh I can understand and partly agree with the first part of your rant, but as for ‘life without money’ … screw that!!

I always like it when a guy like Hugh Burgett shows up and reassures me that not only is most of the public not IN gold, they don’t UNDERSTAND gold. He doesn’t understand how a company can make money and yet effectively drain all the profits out to the top executives though option grants combined with stock buybacks. Dell has been a profitable company the last 5 years but is selling 20% lower than 5 years ago even though they never paid a dividend. It wasn’t because it was overvalued 5 years ago (remember, that was 2003, near the bottom… Read more »


People desire gold for the same reason they desire any currency — because they can trade it for goods and services later. The only difference with gold is that they can’t be robbed by a bunch of politicians and bankers that are constantly printing more of it to keep themselves in power.

SlowLearner from Briz
SlowLearner from Briz

Hi All,

Pardon my ignorance here, but are we talking about buying into gold stocks or physically purchasing bars of gold (to stash under the bed, or wherever?)

Hey SlowLearner They are talking about investing in physical gold, but without having to hold it. Companies exist who enable you to buy gold bullion and they will store it – I believe you receive a cert of ownereship or similar (like shares), so that you can then sell it back to the market when the price has changed (hopefully in your favour). Back in September if you invested around US$700 you would have owned an ounce of Gold. Today that ounce would be worth approx US$990. Gold is seen as more stable long term than phyical money because governments… Read more »

having someone else hold a valuable item for you when alls you have is a piece of paper is retarded beyond belief. even currency becomes worthless when like in russia a barrow load of rubles would buy a loaf of bread. held gold is only useful when the economy rights itself after a long period of the poseidon adventure. if you want to know whats valuable in a time or depression read “the road” by cormac mccarthy, and of course have a weapon at your disposal.

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