Here's a relatively recent graph of the price of gold, adjusted for inflation (admittedly, inflation can be defined in many ways):
On this chart, it looks as though gold's median price would be around $600/oz, so currently it's above trend and presumably the elevated value factors-in some economic concern.
Now, here's a chart correlating the Dow and gold:
It seems harder to spot an average here, since each peak is much higher than the one before. But taking the Dow as it is now (12,606.30) and the current price of gold ($894.90), the present ratio of 14.08 ounces would be in the middle range of the variation since the mid-1920s.
So a purchase of gold now looks like a speculation, rather than a bargain.
2 comments:
I've switched to neutral on gold. I'm not selling, but I'm not buying anymore.
The funny thing is that the agriculture commodities have had some crazy gains since I started buying in August. I'm still bullish on them and will add to my positions as this year goes on, but I wouldn't be surprised by a short term correction some time this year.
Equities are scary as hell right now if you're not a trader. I think as liquidity becomes more and more of a concern this year, the good will get dragged down by the bad. That's why I'm not buying equities right now. I've found some good buys, but they just keep going down with everything else. I'll wait to buy.
Maybe this wait-and-see feeling is a sign that the game has switched to a bear phase.
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