Prominent economist Peter Schiff has voiced serious concerns about the state of the U.S. stock markets, particularly in light of gold's recent unprecedented surge in value. On Wednesday, Schiff drew attention to gold’s historic one-day increase against the U.S. dollar, noting that the spot price of the metal soared to a new peak of $5,590 per ounce. This remarkable rally has triggered commentary on what Schiff describes as a "historic bear market" for equities when viewed through the lens of gold valuation.
Schiff's analysis places emphasis on the relative weakness of U.S. stocks compared to gold. He pointed out that the Dow Jones Industrial Average's current valuation amounts to just 9 ounces of gold, marking the lowest such level since 2013. Furthermore, Schiff highlighted that this figure stands nearly 80% below the Dow's record-high valuation in gold terms observed in 1999.
This assessment relies on the ratio of the Dow’s price to the price of gold, a measure reflecting changes in the purchasing power of equities relative to a tangible, hard asset. This metric serves to illustrate the dynamics beneath nominal stock index figures, which may appear elevated due to inflationary factors.
For context, in 1999 the Dow traded at 5117.12 points while gold was priced at $285.65 per ounce. This translated into a valuation where the Dow was effectively worth about 17.9 ounces of gold. In contrast, contemporary data shows the Dow at 49,015.60 points with gold priced at $5,556.12 per ounce, decreasing the ratio to approximately 8.8 ounces. Schiff stresses that despite gold’s monumental appreciation in the past year, the Dow’s valuation relative to gold remains significantly depressed compared to the 1999 benchmark.
Gold’s sustained rally continues even after the Federal Reserve's recent decision to maintain unchanged interest rates during their January FOMC meeting. The precious metal's rise corresponds with substantial accumulation activity by central banks worldwide, who are purchasing around 60 tons each month. This steady central bank demand has elevated gold to surpass the Euro, securing its position as the second-largest reserve asset after the U.S. dollar. Such shifts reflect growing concerns about fiscal stability, geopolitical tensions, and currency credibility experienced over the past year.
Additional stimuli for gold’s rise include remarks from former President Donald Trump, who downplayed worries about the U.S. dollar's fall to a four-year low, suggesting the currency should "seek its own level." Trump further indicated that a weaker U.S. dollar advantageously positions American companies against their Japanese and Chinese competitors, a statement interpreted by markets as signaling an acceptance of a softer dollar.
Supporting these developments, the SPDR Gold Trust (NYSE: GLD), an ETF tracking gold prices, experienced a 3.88% increase on Wednesday, closing at $494.56 per share, followed by a further 2.72% rise overnight. The fund also garners a high momentum rating according to Benzinga’s Edge Stock Rankings, reflecting strong price trends across short, medium, and long-term horizons.
Collectively, these factors underscore a complex market environment where gold's appreciation contrasts sharply with the equity market's declining purchasing power relative to precious metals. Schiff’s warnings emphasize the importance of considering real asset valuations alongside nominal index levels when assessing market conditions amid macroeconomic uncertainties.