Gold prices have risen for 12 straight years and outperformed U.S. stocks in the wake of the financial crisis as investors buy the precious metal for inflation protection and as a disaster insurance policy.
However, some technical analysts are closely watching the relative performance of gold versus the Dow Jones Industrial Average to get a sense for when the long-term trend may reverse in favor of U.S. stocks. The Dow breaking above 14,000 for the first time since 2007 has put this ratio back in the spotlight.
SPDR Gold Shares (NYSEArca: GLD) has posted a five-year annualized return of 13.1%, more than doubling the 5.3% return of SPDR Dow Jones Industrial Average (NYSEArca: DIA), according to Morningstar.
“It currently takes less than a mere 8.5 ounces of gold to ‘buy the Dow’ which is considerably less than the 44.8 ounces it took back in 1999,” according to chartoftheday.com.
“Priced in gold, the Dow has been in a massive 13-year bear market,” the service notes. “The Dow priced in gold paints an entirely different picture than that of the Dow based on the US dollar (which continues to trade near post-financial crisis rally highs). On a positive note, the Dow priced in gold has just broken above resistance of its latest downtrend channel.”