Inflation Adjusted Dow and Gold

Steve Saville has an interesting post in which he notes the difficulty in coming up with real inflation adjustments by chasing price data around (like CPI). Using a formula of money supply and population data along with a guesstimate on productivity he has come up with long-term inflation adjusted charts of gold, silver, Dow, oil and the GSCI commodity index…

An Attempt to Quantify the Immeasurable

In practically and tactically managing the current trends – including most notably, the US stock market bull mania – and looking forward to the end of the trend (using our interest rate indicators and other sign posts like SPX/Gold & Dow/Gold) out on the horizon, I found Saville’s inflation adjusted Dow and gold most notable.

I’ve taken the liberty of marking up two of Steve’s charts to show the Dow having broken through a trend line (simply meaning that the power of this inflationary bull market in stocks is greater than the power of the Greenspan era inflationary bull) and gold’s long, sideways amble in real terms, which is as it should be. All gold is supposed to do is keep up with inflation over the long-term, nothing more.

dow

gold

The Dow has not made a higher high in inflation adjusted terms and that’s important folks; especially with the (would-be) yield limiters to the ‘inflation trades’ overhead. Meanwhile, gold’s sideways meandering stands it in good stead relative to stocks for AFTER the inflation that has rooted in stocks on this cycle blows out.

Meanwhile, current trends should move higher in the short-term. That includes stocks relative to gold, which have a logical termination point per an SPX/Gold chart we’re tracking in NFTRH.

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