As the Gold/DOW ratio closes in ever increasing increments going forward, Gold will continue its upward "spiral" until it ends. (It inevitably will!) Cos like SAN will will experience an ever increasing SP, simply following Gold's draft!

It's not "rocket" science!

The logical consequence of government intervention designed to prolong booms and curtail busts should be a long-term boom-bust cycle with increasingly large oscillations, which is exactly what the following chart of the Dow/Gold ratio shows is occurring (it's nice when the data meshes with the theory). Over the years we have referred to the long-term chart of the Dow/Gold ratio as the most important chart in the world for investors because it so clearly reveals the secular trends in the financial world.

Note that we've drawn a vertical line on the chart to mark the birth of the Federal Reserve. Not coincidentally, this line also marks the time at which Dow/Gold's long-term oscillations began to increase in magnitude. The connection is that once a central bank was created it became possible for credit to expand much more during the booms and for the government to spend much more during the busts.

On the chart we've also marked the point at which the last official link between the dollar and gold was severed. From this point forward there was no objective limit to the amount of monetary inflation, which goes a long way towards explaining why the oscillations have since become even bigger.

As an aside, based on the popular belief that Paul Volcker's actions as Chairman of the Fed ended the gold bull market of the 1970s some gold bulls are apparently concerned that Volcker's involvement with the incoming Obama administration will limit gold's upside potential. This is not a legitimate concern. The gold bull market of the 1970s ended in January of 1980, about 5 months after Volcker took the helm of the Fed. During this 5-month period the gold price rocketed upward in spectacular fashion, driving the Dow/Gold ratio down to around 1 and thus making gold more expensive relative to the US stock market than it had been at any time over the preceding 100 years. It was this dramatic over-valuation of gold relative to the stock market (and almost everything else) that ended the gold bull market, not the actions of Paul Volcker.

Chart Source:(www.sharelynx.com)

Steve Saville

It's simply amatter of "staying the course!"

3 to 5 MM ozs will be quite enough to fulfill our expectations. Any excess above those #'s, while welcomed, will move longs from filthy to filthy, filthy! Rich that is!!

It becomes a matter of how "filthy" your your expectations are!

RUF