Dow-Gold Ratio Signals Impending Market Crash, Predicts Crash by 2030

Economist Vasilii Sapozhnikov from the Mises Institute argues that the Dow-Gold ratio is the true measure of inflation and shows stocks have lost a third of their value since 2023. He claims this ratio is more accurate than traditional measures like the Consumer Price Index (CPI) because it's not controlled by any institution or government agency.

The Dow-Jones Industrial Average has been near its all-time high, while gold prices have been around $4,400 an ounce. Dividing the Dow by the gold price shows that in early 2024, it cost about nineteen ounces of gold to buy one share, but by August 17, this ratio had fallen to twelve.

Sapozhnikov points out that the CPI has several problems, including its assumption that money is a fixed reference point. He argues that every market price is actually a ratio between two assets, and when you use paper currency as the unit of measurement, you're hiding the true value of assets.

The economist then uses historical data to show that the Dow-Gold ratio has accurately predicted major economic inflection points in the past. He claims that if the current trend continues, the ratio will reach single digits by 2030, and this would be a sign of an impending market crash.