Author: April 28, 2022

There are various methods that investors use to determine the best time to sell or buy gold. There is one common tool that both stock market investors and gold investors use to determine the best time to sell any assets they may have.

Life would be much easier if everyone had a crystal ball they can look into to see the future and how much the price of gold is going to change. Some people get investing in the stock market right and some don’t. Gold is better than most assets because no matter what is happening in the world, the precious metal retains its value.  

Let’s look at one tool that is often spoken about in the gold marketing world, and that is the Dow/gold ratio.

Experienced investors have used this ratio for years and have successfully managed to avoid some of the worst stock market performances and pushed them to look at gold as a safe haven.

How does the Dow/gold ratio work and can it help you make profitable investment decisions when it comes to gold? Firstly, you need to know the definition of the Dow/gold ratio. Dow Jones Index tracks the movement of the stock price of the largest companies traded on the U.S stock market. This index accounts for all major industrial sectors in the American economy. It does not pit gold against a specific industrial asset. The ratio is used to indicate the amount of gold you may need to buy the Dow Jones.

The important points you need to know about this ratio are:

– When the value of stocks goes up, the ratio also goes high but the value of gold is suppressed.

– When the Dow/gold ratio is low, the value of stocks drops, however, the price of gold goes up

The point is: When the ratio is high, you might not be able to get a great price for gold when you want to sell, however, it is favorable for anyone who wants to buy. The inverse is true for a low dow/gold ratio. A lot of well-known reputable investors rely on the Dow/gold ratio and use it as one more tool to help them make decisions on whether they should buy or sell different assets in their investment portfolios.  

According to expert analysts, there are two numbers you should look at 5 and 15. These are numbers drawn from decades-long trends. According to historical data, every time the ratio went under 15, the price of gold would drop and that would be an indication that it is time to buy gold. There were two major instances where this was the case: During the 2000 dot-com crisis and the big economic crash of 2008.

The ratio has oscillated between 5 and 15. Currently, the ratio is above 20 which is in line with the rise of the price of gold. This could mean that this is the perfect time to sell your gold now that the price of gold has gone up which can mean that now is the perfect time to sell.  

Stock markets can crash without warning and they can crash spectacularly too. The effects of a crash can be immediate and long-lasting. To avoid being caught on the wrong side of such a crash, investors use tools like the dow/gold ratio to make decisions about buying or selling gold.