By saritwat @ Adobe Stock
Take a good look at my chart below of the Dow Jones Industrial Average (Dow 30) and the price of gold. You can see gold hitting new highs at $3,342/troy ounce, while the DJIA Index has fallen to 39,669 points, or a drop of about 11.9% since peaking on December 4, 2024.
Gold is in a secular bull market, and it will remain in a secular bull market until the world’s central banks stop printing excessive amounts of money and governments stop issuing excessive amounts of debt. One indicator of prospective returns in gold is the ratio of the Dow Jones Industrial Average to the price of gold. When the ratio is falling, gold is outperforming the Dow. Over the last 124 years, as portrayed in the chart below, there have been three completed secular bull markets in gold versus the Dow. The current bull market is the fourth.
In each of the previous bull markets, the ratio of the Dow to gold dropped below six. Today, the Dow is trading at 12X gold. How much further it will fall is anyone’s guess. Don’t put yourself in the prediction business. Understand, though, that as the ratio falls, the relative affordability of the Dow is rising.
Can you own too much gold? For most investors, 10% is probably the max. You buy gold as an insurance policy. Gold offers protection against inflation, currency debasement, and political and geopolitical turmoil. I buy gold and hope it goes down, because when gold is falling, it is often true that everything else in your portfolio is rising.
The Dow 30 today consists of these companies:
| Symbol | Company | Yield % |
|
AMZN |
Amazon.com Inc | 0 |
|
AXP |
American Express Co | 1.30 |
|
AMGN |
Amgen Inc | 3.37 |
|
AAPL |
Apple Inc | 0.51 |
|
BA |
Boeing Co | 0.00 |
|
CAT |
Caterpillar Inc | 1.94 |
|
CSCO |
Cisco Systems Inc | 2.94 |
|
CVX |
Chevron Corp | 5.05 |
|
GS |
Goldman Sachs Group Inc | 2.40 |
|
HD |
Home Depot Inc | 2.66 |
|
HON |
Honeywell International Inc | 2.34 |
|
IBM |
International Business Machines Corp | 2.80 |
|
JNJ |
Johnson & Johnson | 3.38 |
|
KO |
Coca-Cola Co | 2.85 |
|
JPM |
JPMorgan Chase & Co | 2.44 |
|
MCD |
McDonald’s Corp | 2.29 |
|
MMM |
3M Co | 2.24 |
|
MRK |
Merck & Co Inc | 4.24 |
|
MSFT |
Microsoft Corp | 0.89 |
|
NKE |
Nike Inc | 2.99 |
|
PG |
Procter & Gamble Co | 2.54 |
|
SHW |
Sherwin-Williams Co | 0.95 |
|
TRV |
Travelers Companies Inc | 1.74 |
|
UNH |
UnitedHealth Group Inc | 1.44 |
|
CRM |
Salesforce Inc | 0.67 |
|
NVDA |
NVIDIA Corp | 0.04 |
|
VZ |
Verizon Communications Inc | 6.21 |
|
V |
Visa Inc | 0.71 |
|
WMT |
Walmart Inc | 1.03 |
|
DIS |
Walt Disney Co | 1.21 |
If you follow the Dogs of the Dow strategy, you’ll quickly notice a few yields over 4%, with a few more in the 3% range. Historically, though, the yield on the Dow Jones Industrial Average is still low at 1.84% today.
What are gold and the Dow telling investors today? Diversity can benefit a portfolio. I have always recommended diversification and patience built on a foundation of value and compound interest.