NEW YORK (CNNMoney) -- Gold jumped to a record high Tuesday after the minutes from the Federal Reserve's June policy meeting indicated the central bank might be open to more monetary stimulus.
Another new high today. Interesting observation below:
Tuesday's record high is not adjusted for inflation. Gold's inflation-adjusted record is roughly $2,233, according to Minneapolis Fed's inflation calculator.
There was something else I read recently. The ratio between the Dow Jones Industrial Average and the price of gold was not comparable to the last historical peak in a bull market for gold. Back in the late seventies and early eighties, the ratio of gold to the dow was about 1 to 1. That is, 1 ounce of gold would equal the price of the Dow Jones Industrial Average.
To get that today would require a gold price of $12,000 an ounce! Or the Dow would have to fall to 1500.
Looking at oil prices in that era, it looks like it was about $35 a barrel max. About 23 barrels of oil per ounce. Today's ratio would be about 15.
There are those who say gold is in a bubble. But when compared to those two numbers, it isn't. Gold is relatively cheap. Or the Dow and oil is expensive. It can't be both.
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