Chart of the Day 02/18/2011
DOW Priced in Gold

Today's chart of the day displays the DOW priced in Gold. You'll see on the chart below how the DOW has been declining since 2000-2001 when priced in ounces of Gold.

I've seen similar charts over the years but what can we really take away from this? For one, even though the DOW has been steadily declining when priced in Gold since 2000-2001, the DOW was at approx. 11,700 in early January 2000 and is at approx. 12,100 today in February, 2011.

Pretty darn close to a zero change in 11 years as compared to the decline when priced in Gold. What this does show is the drastic effects of inflation over the last 11 years. Let's take a look:

  • DOW January 2000 to February 2011 = +3.42% gain over 11 years
  • Gold price January 2000 = $282, February 2011 price of $1,400 = +396% gain
  • Oil price January 2000 = $18.00, February 2011 price of $100 = +455% gain
  • Corn price in January 2000 = 200/cents per bushel, February 2011 price of 720/cents per bushel = +260% gain
  • Regular Gasoline U.S. Average January, 2000 = $1.26/gal, February, 2011 price of $3.14/gal = +149% gain
  • U.S. Federal Minimum Wage 2000 = $5.15, 2011 = $7.25. = +40% gain
  • Per Capita Income from the U.S. Census Bureau1: 2000 = $22,346, 2009 = $26,530. = +18% gain

You can see by the above data that commodity inflation has been increasing at a much faster rate than the DOW as well as personal income between 2000 and 2011.

For some perspective on the long-term performance of the stock market, today's chart presents the Dow priced in ounces of gold (i.e. the Dow / gold ratio).

For example, it currently takes 8.8 ounces of gold to 'buy the Dow' which is considerably less that the 44.8 ounces it took back in 1999. Priced in gold, the Dow has been in a severe 11-year bear market.

Lately, however, the Dow (priced in gold) has stopped declining for long enough to break above its six-year, accelerated downtrend channel.

Chart courtesy of Chart of the Day
Chart of the Day 02/18/2011 - DOW Priced in Gold

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