The Dow-to-Gold Ratio

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This chart really interests me.

What it measures is the relative value of the stock market, in this case, the DJIA, compared to gold.

It’s the Dow divided by gold price per ounce.

For example, if the Dow is at 36,000, and gold is at $2,000 an ounce, the ratio is 18.

It’s a way to gauge whether stocks are expensive relative to gold, or whether gold is cheap relative to stocks.

Now, the reason this chart is of interest to me, is because whenever the Dow to Gold Ratio broke below the approximate 12 - 13 level, it coincided with a major economic/financial down turn.

• 1929 – Great Depression

• 1973–74 – Oil shock, stagflation, and stocks entering a brutal bear market while gold soared

• 2008 – Global Financial Crisis, with gold rallying and equities collapsing.

Now in 2025, the ratio is again approaching that same critical level (~12.22).

What Happens When It Breaks

A falling ratio can play out a few different ways:

1. Stocks fall faster than gold rises → a real equity bear market

2. Gold rises faster than stocks → money leaving equities and running to hard assets

3. Both happen → stocks crash, gold explodes higher (think 2008)

Right now, it looks like we’re in scenario #2: stocks are still hitting records, but gold is outpacing them.

The big question: does that turn into #3?

History says it could.

The Bigger Picture

Sure, you get little dips all the time (look at the grey recession moves on the chart).

But the big breakdowns only happen during serious stress periods.

When the big ones happen, it’s never just about “stocks vs. gold.”

It’s usually about:

• Debt and inflation pressures

• Currency debasement

• Loss of confidence in paper assets

• Money fleeing into commodities and hard assets

If history rhymes, a breakdown here doesn’t just mean gold goes up.

It means equities could face heavy downside while gold enters a full blown bull cycle.

Cue the dollar breaking down.

And here’s where it gets even more interesting.

The Dow to Gold ratio is testing that critical breakdown zone at the same time the U.S. Dollar Index (DXY) is sitting right on long-term support.

If the dollar loses this trendline, it would confirm the move we’ve seen before in prior cycles: capital rotating out of paper assets, the dollar weakening, and gold breaking higher.

A falling dollar adds fuel to the fire, making gold and commodities even more attractive globally, while putting even more pressure on overvalued equities.

What’s Different This Time?

Do I think we’re heading for a 2008-style crash?

Honestly, no.

But do I see enough warning signs that I’m watching this like a hawk?

Yes, 100%.

Valuations are stretched to say the least.

Inflation’s still more than sticky and J Pows is in a tough spot.

Debt’s at record highs.

Defaults on auto loans and mortgages are rising.

There are cracks in the private credit market.

And gold is not so quietly anymore grinding into what looks like a new bull market, one of which we are still in the infancy of.

That tells me: proceed with caution.

Here’s one more that plays into the infancy of the commodities supercycle.

How I’m Playing It

• No debt, no leverage

• 30–50% cash on the sidelines

• Picking only the best names in equities that aren’t related to commodities

• Diversified with commodities and miners

Because every “reset” feels scary when it hits.

It even gets to the comical stage when you can’t believe what you’re seeing, like when oil went negative in 2020.

I’ve been through a few now, including 2008 when I was licensed as a broker.

But they also set up some of the best buying opportunities you’ll ever see.

This ratio has only been at this point three times in 100 years.

Each time was followed by a massive shift in markets.

And each time, fortunes were made by the people who stayed liquid and saw it coming!

So yes — this is a scary chart. But it’s also exciting, if you’re ready.

Keep an eye on it! And, as always, Happy Hunting!

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