Profit Confidential (www.ProfitConfidential.com) an e-letter of Lombardi Publishing Corporation, a 30-year-old consumer publisher that has served over one million customers in 141 countries, says the Dow Jones Industrial Average-to-gold multiple points to much higher — gold prices in the second half of 2016.
“After almost a month of trading in 2016, gold prices are up 5.5%. At the same time, the Dow Jones Industrial Average is down 6.8%,” says economist and lead contributor Michael Lombardi. “The way the markets are heading, it wouldn’t be a big surprise to see this trend continue throughout the year, with gold prices ending 2016 much higher than they are today.”
The Dow-to-gold multiple shows how many ounces of gold it takes to buy a unit of the Dow Jones Industrial Average index. The number of ounces of gold needed to buy one unit of the Dow Jones Industrial Average had been falling since late 1999 and only began changing in 2011. While in 1999 it took more than 40 ounces of gold to buy one unit of the Dow Jones Industrial Average index, today, that number has changed to only about 15 ounces.
“The number of ounces of gold needed to buy one unit of the Dow Jones Industrial Average is likely to fall into single digits, just as it did between 1979 and 1998,” says Lombardi. “This is because gold prices have been idling since 2011, but now—due to supply constraints and strong demand on the heels of a weak global economy—they’re rising.”
Corporate U.S. profits and revenues have been contracting quarter after quarter; in addition to that, global stock markets are entering bear territory, even after central banks from around the world introduced artificial interest rates to kick-start their economies. These coincide with forecasts suggesting that the stock market will have a disappointing year in 2016.
“The fundamentals of gold prices continue to be remarkable. The U.S. Mint’s sales are strong, and demand from central banks around the world is on the rise,” Lombardi explains. “The outlook for gold remains bullish in 2016. As stocks continue to slide lower, we could see a flight towards safety that could result in much higher gold prices.”
Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. More information on Lombardi Publishing Corporation can be found at www.LombardiPublishing.com.
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