Gold's Historic Surge Prompts Warning of 'Historic Bear Market' in Stocks, Schiff Says
Spot gold prices skyrocketed to a record high on Wednesday, notching their biggest one-day dollar gain in history. The surge has reignited a fierce debate about the health of the U.S. stock market, with prominent gold advocate and economist Peter Schiff issuing a stark warning to investors.
In a post on social media platform X, Schiff pointed out that the Dow Jones Industrial Average is now worth just over 9 ounces of gold, a level not seen since 2013. "Don't be fooled by inflation or nominal stock highs," Schiff cautioned. "This is a historic bear market when you price stocks in real money."
The Dow-to-Gold ratio, a key metric for some analysts, measures how many ounces of gold are needed to buy the benchmark index. It serves as a long-term gauge of equities' purchasing power against the hard asset. At its peak in 1999, the Dow was worth nearly 18 ounces of gold. Today, that ratio has been halved, suggesting a significant erosion of the stock market's value relative to the precious metal, even as major indices hover near all-time highs in dollar terms.
Behind Gold's Meteoric Rise
The rally defied expectations, coming on the same day the Federal Reserve held interest rates steady. Analysts point to sustained central bank purchases—estimated at 60 tons per month globally—as a primary driver. Gold has now surpassed the euro to become the world's second-largest reserve asset, fueled by geopolitical tensions and concerns over fiscal sustainability and currency credibility.
Comments from former President Donald Trump, who suggested the U.S. dollar should "seek its own level" and that its decline aids American competitiveness, provided additional momentum. Markets interpreted the remarks as signaling tolerance for a weaker currency, boosting gold's appeal as a hedge.
The SPDR Gold Trust (GLD), a major exchange-traded fund tracking gold, closed up nearly 4% on Wednesday, reflecting the intense investor interest.
Market Voices: A Divided Reaction
Michael Thorne, Portfolio Manager at Sterling Capital: "Schiff's ratio is a valuable long-term perspective tool, but it's not a short-term trading signal. The current environment of high debt and geopolitical uncertainty structurally supports gold, but equities can still perform well in nominal terms during such periods."
Lisa Chen, Independent Financial Analyst: "This is a flashing red light that many are choosing to ignore. When a perceived 'barbarous relic' massively outperforms the darling of Wall Street, it's a profound vote of no confidence in financial assets and the policies behind them. The capital flight is real."
David R. Miller, Retail Investor: "It's just noise and fear-mongering. The Dow is near 40,000! My tech stocks are up. Gold bugs have been predicting the end of the world for decades. This is just another blip."
Sarah J. Wilkins, Economics Professor at Carlton University: "The dramatic shift in the Dow/Gold ratio underscores a decade-long trend. It speaks to the extraordinary monetary expansion post-2008 and now post-pandemic. Investors are subtly re-allocating, seeking assets detached from central bank balance sheets."
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