The Dow to Gold ratio indicates the number of ounces of gold it takes to buy the shares in the Dow Jones Industrial Average index. The Dow Jones is a stock index that includes 30 large publicly traded companies based in the United States. It is one of the oldest and most-watched indices in the world. Turning points in the Dow-gold ratio have coincided with turning points in market history: The stock market reached historic highs in 1929, 1966 and 1999 as the ratio did the same. Likewise, the market sat near historic lows in 1932 and 1980 as the ratio hit bottom. The chart below shows the same data on a linear scale.
This chart plots both the Dow Jones and the price of Gold. However, it is important to note that the Dow Jones is a price index in contrast to a total return index. Therefore, it does not include dividends. The effect of dividends is demonstrated here: Stocks vs. Gold and Silver.
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