We’re not going to join the chorus of market timers that are trying to pick a peak price for gold.  Instead, we’re going to watch golds relationship to the Dow Jones Industrial Index.  As our thermometer indicates, the ending ratio of the price of an ounce of gold, compared to the DJI, increased with each gold bull market over the past 199 years – in 1904, 1933 and 1980.  We think that this time gold will not stop rising until the dollar value of an ounce of gold will buy one share of the Dow.

As of Jan 31, 2012, one ounce of gold at $1740.40 would buy 0.138 of a share of the Dow Index, trading at 12,632.  This means that over the next 5 to 10 years, gold is likely to increase by a factor of 7.8, or the Dow will drop by a factor of 7.3 or – more likely – some combination of the above.  We update our thermometer monthly and invite you to tune in to watch gold’s progress.