Yesterday, the Dow dropped another 237 points. Gold held steady. The unstoppable force of inflation seemed to slow down. The immovable object of deflation didn’t budge.
And what of our ‘Trade of the Decade?’ “Sell stocks; buy gold,” we said. That was when stocks had hit an all-time high…and gold had hit something close to an all-time low. At the end of the 20th century, it took 43 ounces of gold to buy the Dow stocks.
Well, as of yesterday, you could have bought the Dow for only 15 ounces.
So far, so good. We expect that we will eventually see the Dow and gold back on equal speaking terms – one to one…or close to it. So, we’ll hold our trade until the end of the decade. Let’s see what happens. The Dow could easily lose 30% – taking it down to 8,000…or maybe as low as 5,000.
Could gold ever sell for US$5,000? Well, we don’t know…but hold onto your hats. Fasten your seat belts. Inflation and deflation still appear to be on collision course. The ride could be bumpy…and we’re holding on to the yellow metal, just in case.
Markets and Money