Dow/Gold Ratio Pointing to a Painful (Uncut) 03-05-2025

Dow/Gold Ratio Pointing to a Painful and Quick Unwind of the Credit Bubble.

I actually think the correction or the credit collapse here could be very painful and very short-lived, very quick. We could see this happen in the next two to three years. Wednesday, March 5th, 2025, Maneco64, Home of Alternative Economics and Contrarian Views.

Today, we’re going to look at why, in my opinion, the major shift from paper assets, i.e. stocks and bonds, into hard assets is being confirmed right now. And we’re going to look at an indicator, which I think is a great one to keep track of, the Dow Gold Ratio, to see what’s really going on. I’d like to apologize.

I have a little bit of a cold and a sore throat this morning. Not sure why. Well, it happens, I guess.

We’ve had very cold mornings and relatively warm afternoons, so maybe that’s why it is. And I was out playing golf yesterday. But anyway, before we go into the Dow Gold Ratio, I just wanted to give a shout out to Miles Franklin, my precious metals affiliate in the U.S. And I looked at their website this morning for the specials and I was surprised.

And why is that? Well, he’s got pre-1933 $20 gold liberty coins, random years, so just under an ounce of gold. I think it’s 0.9675 of an ounce, because if you remember well, one ounce of gold back in the day used to be $20.67. But anyway, what kind of shocked me is that there’s almost no premium over spot here for these coins. Just $20 over, $20 over spot per coin.

Well, that’s like two thirds of a percent, really, premium. I’ve never seen them this low. Of course, he’s got the same gardens at $50 over melt.

That’s different, but that’s pretty good deal too. And he’s got all the pre-1965 junk, silver, half dollars, quarters, and dimes. If you’re interested, contact Miles Franklin.

All the details are below in the description. And mention Mario or Monecco 64. And for my viewers in the U.K., same thing goes for gold investments.

They always have good specials. You can ask them for specials as well. And there are some specials with my promo codes below in the description if you want to look into it.

So back to the major shift from paper to hard assets. And I think what’s going on geopolitically with the tariff wars is a symptom of that. I think the Trump administration, they’ve realized that this financial financialization of the economy we’ve had since the early 80s has benefited a small group of people on Wall Street and big corporations.

It’s benefited governments because government has become so big. It’s benefited the bureaucracy. And what I’m trying to say here, I think this shift would happen no matter what, even if Trump wasn’t around, it would have been someone else.

So and one of the reasons I’ve been warning about this shift for about, well, five years really, I started thinking about it in 2019 because I thought the bond market, a bull market, you know, that helped keep interest rates always going lower and keep borrowing increasing was about to be over. I saw like a 40-year cycle in that. And the early 2020s I thought would be right about right around the time from the early 80s.

And as I’ve said earlier in this video, the Dow Gold Ratio, I think, is a perfect indicator for that. And we’re going to look at it today through a couple of charts, and I’m going to try to tell you what I’m seeing. And so for those of you who don’t know about the Dow Gold Ratio, it basically means how many ounces of gold you need to buy a Dow Gold Industrial Index.

That’s all it is. So the first chart I wanted to show you is a chart from Gold Charts Are Us, and it’s a very long-term chart. It goes back to 1800.

And I just wanted to show you how much more stable this Dow Gold Ratio was during the pre-Federal Reserve era, pre-1913. And you can see that Gold Charts Are Us calls the post-Fed era the fiat capital era. And look how volatile this is.

The Federal Reserve has not kept things stable, has it? And now we’re going to come to a chart that I designed on TradingView. And yeah, it’s not as long-term, but as you can see, I’ve got a little bit of the no-Fed era here. And why during the Fed era or the fiat capital era are we seeing such big swings? Well, it’s very clear to me, and it’s probably clear to most of you who have been following me, the more credit they pump into the system with funny money, the more extreme the credit cycles are going to become.

And it doesn’t help anyone except the speculators and the people on Wall Street, governments and the bankers. There’s very few people out there who know how to navigate this. They think everything is stable and perfect, that the Federal Reserve is doing everything to keep full employment and low inflation, but they do anything but that.

So let’s look at the ratio itself now. The first major credit boom we had after the Fed was created, you can see, was in the 1920s. And that ratio, excuse me, went up to about 20.

You needed 20 ounces of gold to buy a Dow Jones Industrial Average. And that was the credit boom there of the 1920s, the roaring 20s. And then we saw the collapse, the credit collapse during the Great Depression.

And we saw that ratio bottom just around 2 in 1933. And from 1933 to 1966, we had another credit cycle, another credit bubble, so to speak. The ratio went up to around 28 in 1966.

And then we had a more controlled correction. It wasn’t as quickly as in the late 20s, early 30s. It took about 14 years, from 1966 to 1980.

And the Dow Gold Ratio went down to around 1. Gold was around 8.50 an ounce, and the Dow was around 8.50. And that was the bottom of the credit cycle. And as you can see, from 1980, 81 up until 2000, we had another credit bubble. And that ratio got up to almost 45.

And so we come now to the correction of this credit bubble. And you might think, well, we still have a credit bubble. Yes, we do.

And I think, as you can see from the chart here, we had massive QE, or kicking the can down the road. I think that’s what we’ve had. And that’s why this ratio hasn’t kept going down in a smoother fashion, as I drew from this trend line here with the red arrow.

And that’s why it corrected back up to around 22 in the last decade or so. But as you can see now, and I took this ratio 14.58 from last night, 4th of March, after the Dow had closed. And I can tell you that 14.58 is the lowest level we’ve seen since 2020, November 2020.

So almost five years. So to me, that’s pointing to the fact that this mini credit bubble within a credit collapse, I would say, is coming. Yeah, it’s coming undone.

It’s the last leg of it. And I actually think the correction or the credit collapse here could be very painful and very short-lived, very quick. We could see this happen in the next two to three years.

That seems like a long time. Nowadays, people want to see things move in weeks or months. But in my opinion, two to three years is not a long time in the markets.

And I think it would have been smoother if they hadn’t tried. The central banks and governments try to throw everything at it like they’ve been doing since 08, since 2020. But I think it’s the end of it now.

And in terms of prices, where will the Dow be or where will gold be when we come to the bottom of this megaphone? Because this is a megaphone. Well, one-to-one would be an interesting level, of course. But if you look at 1933 and 1980, we’ve seen lower lows.

It went from two to one. We could even go below one, which means you’d need half an ounce of gold to get the whole basket of the Dow Jones Index. So it could make a big difference from one to half is a huge difference.

There’s a lot of money there to be made or lost in terms of purchasing power. Do I think this is going to happen? Yes, I definitely think this is going to happen. And people like Pierre Lassonde are looking for this.

I saw that Eric Sprott just yesterday in an interview with Kitco. He doesn’t see why $250 or $300 silver is impossible. And that would correspond with a big move in gold.

So there’s a couple of ways this could happen. It could happen in a hyperinflationary way where they keep pumping the system with funny money. And it triggers a massive rally in gold, but it also keeps the stock market up.

Or it could happen in a deflationary collapse fashion where they allow things to implode. And let’s say gold goes up to $20,000 while the Dow drops to $20,000. That’s possible.

But what am I going to be doing in the next two or three years? Well, I’m going to try to keep stacking gold and silver. I’m going to have a small percentage of my savings or portfolio in the mining, gold and silver mining, maybe also in some other commodity-based stocks. And yeah, I’m going to be waiting for this move.

If it gets to one-to-one, maybe unwind some of it into other assets. It doesn’t have to be stocks. It could be anything else that you think is undervalued, heavily undervalued versus gold, or just keep it in gold.

Why just half? Well, because if we go to a half-to-one, the ratio, it’s a major, well, it doesn’t sound like a lot, but it’s a major improvement on your gold holdings relative to everything else. So I saw someone that I follow in Australia, on X, this lady, she’s in the markets and she’s a gold bug. She loves the mining sector.

And she said that one of her colleagues at work, and I assume that’s a fund manager, he’s taking some, rotating his or her clients out of the general stock market into the miners. That’s just an anecdotal evidence there. It doesn’t mean much, but I think this is what this chart is showing us.

It really looks like it’s starting to keel over this Dow Gold ratio. So there you go. This is, of course, my opinion.

You should do your own due diligence, your own homework, and study these things yourself before putting your money into whatever it is you want. I’m not saying you should do it. It’s just my opinion.

So let’s quickly look at where the markets are this morning. It’s 824 AM London time. So interesting that silver this morning is doing quite well.

It’s up 1% at 32.30. You can see here this monthly chart is starting to look really good, in my opinion. I guess the next big resistance is going to be about around 35. And yes, we’re still a little bit far away from that.

But when silver starts moving, it goes very quickly. So yeah, I think it’s formed a very long and frustrating base, but it’s a very bullish base silver. And it’s surprising how gold and silver have rebounded quite quickly from that dropping they had in the last few days last week.

Gold right now is at 29.20. It’s up a couple of bucks. High has been 22 and the low has been 02. And the same thing goes for the monthly chart of gold.

It’s looking well, it’s looking like there was no correction. It’s just, it’s just kept going up. And I don’t like making price forecasts, but I wouldn’t be surprised if we blow through 3000 before the end of March.

As you can see here from this chart, it looks pretty good. The monthly technicals. What about the stock market? Well, there’s a little bit of, I don’t know what it is, some kind of game.

President Trump announced tariffs on Mexico, Canada, and he announced extra tariffs on China, markets dumped. And then later on, we might be able to negotiate with Canada and Mexico and the markets rebounded. It’s almost as if someone’s been trading there on inside information.

I don’t know. It’s just really weird. So the stock market rebounded yesterday, late yesterday, it was still down the Dow and the S&P.

I think that the Nasdaq was able to finish up. And this morning overnight, yeah, it’s still continuing to go up. The Dow is up 280.

Nasdaq is up 100, is up about 200. And the S&P is up about 44. But I still think looking at that Dow gold ratio, that stocks are weak.

They don’t look very good. So I wouldn’t be surprised to see further losses going forward. And the currencies as well, we’re seeing the pound and the euro continue to go up quite a bit versus the dollar here this morning.

We’re already at 128.40. We were around 125 a week or two ago. So it’s up a third or 0.4. The euro is up half a percent at 106.85. So that should continue to help gold and silver, in my opinion, a weaker dollar. The other general commodities, WTI crude, that’s down two thirds of a percent at 67.50. High grade copper is up 4%, actually.

That’s pretty encouraging for the people who’ve been waiting for a move in copper. We’re at 4.75. So that’s pretty encouraging for the whole commodity sector. And just quickly look at the 10-year yield or the treasury market.

Yeah, we got down to almost 4.10 yesterday, but now it’s rebounding. It’s back to 4.25. So there you go. With that, I’m going to wish you all a very good day.

Take care. Bye.