Dow Gold Ratio TopThe conditions in the market are setting up for a once in a lifetime gold trade.  Investors need to realize that when the Fed can no longer prop up the stock indexes, bond markets, and the overall economic system, we will have an implosion of paper assets and explosion in the value of gold (and silver).  Once this trade takes place, it won’t happen again.
We are presently sitting at two market extremes…. a bloated blue chip stock index that moves higher from the very QE gas emanating from the Fed, while gold has been pushed down like a huge balloon underwater.  At some point in time, the popping of one will release force of the other.
Very few know it… but the Once in a lifetime Gold Trade is being set up right now.

Currency debasement is being seen internationally and will again benefit gold in the medium and long term. The second round of money printing by the Federal Reserve pushed spot gold prices to a record nominal high of $1,920.94/oz in September 2011.  Given continuing debasement new record nominal gold highs and indeed inflation adjusted gold highs over $2,400/oz will almost certainly be seen in the coming months.

We continue to favour the Dow Gold Ratio chart as a good indicator as to when the gold bull market might end. It is likely to reach the levels seen in 1980, close to  1:1 or the Dow at 5,000 or 10,000 and gold at between $5,000/oz and $10,000/oz.

This will be an indication that the gold bull market will be in its final innings. Provided of course we do not return to some form of gold standard whereby gold bull markets and bear markets will again become confined to history.

We continue to be more bullish on silver in the long term and believe the gold silver ratio should fall back to the geological 15:1 level as was last seen in 1980. This means that silver continues to be more attractive from a return point of view.