Gold is Still Cheap

On a day when the market is anticipating greater central bank intervention, it seems more appropriate to look back to the annals of history.

I have long been of the opinion that the long-term historical pattern is that bear markets tend to bottom out at DJIA:AU 1:1.

We have a way to go yet — either in terms of a fall in stock prices, or a rise in the price of gold. And with our faithful Keynesian friends promising to print ’til stock prices stabilise, it looks much more likely that gold will be the one making the major move.

I will not try to forecast prices beyond the 1:1 ratio, but at a push I would facetiously say long term price targets remain at $36,000 for both, for obvious reasons.

$36,000 is a significant number for more serious reasons, too. It is the price gold would have to rise to to back all global financial assets at current valuation.