Dow Theory attempts to define and identify major moves in markets referenced here as the “primary trend.” In this piece, we will outline the price of gold according to Dow Theory.
We’re going to review and analyze the primary trend that extends from the September 2011 peak to the currently established low in the price of gold in December 2015. We believe that this information is critical to understanding where we are and where we might be going. This interpretation is based on the work of Charles H. Dow, co-founder of the Wall Street Journal and namesake to the longest continuous stock market indexes.
Keep in mind that all of the analysis that follows is done in generalities so that an individual who is curious about Dow Theory can refer to the technical manual on the topic titled The Dow Theory by Robert Rhea. However, the true heart of Dow’s theory is found in his original writing which covered the topic of earnings, dividends, effect of dilution of shares and economic outlook AND NOT lines on a chart. Two books that cover Charles H. Dow’s work as a fundamental analyst and an adept economist are titled Dow Theory: Unplugged and Charles H. Dow: Economist, respectively.
A Look Back
It is necessary to outline the history of primary trends in the price of gold to ensure clarity of where we are coming from and where we might be now. Below is a graph of the price history of gold with the primary trends.
The dates for the primary trend indication are as follows:
The percentage change for the primary trend indications above are as follows:
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I: +435%
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II: -45%
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III: +629%
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IV: -66%
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V: +642%
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VI: -45%
Dow Theory Primary Trend Analysis at VI
