Dow-to-Gold Ratio Exposes Hidden Losses in Record Stock Market – News and Statistics

Sep 24, 2026

According to Kitco News, economist Vasilii Sapozhnikov of the Mises Institute contends that the most closely watched gauge of inflation is inaccurate, outdated and misleading by design, and that the relationship between the Dow Jones Industrial Average and the price of gold offers the only dependable alternative.

Sapozhnikov noted that on August 12 the Bureau of Labor Statistics reported consumer prices rose 0.1 percent in July and 3.4 percent over the prior twelve months, a tenth of a point below June, and that markets read the figure as evidence the measuring rod was behaving.

He then proposed viewing the same economy through a different lens. On August 17, he observed, the Dow Jones Industrial Average closed at 53,459.78, near a record high, while gold traded around $4,400 an ounce. Dividing the first figure by the second put the Dow at roughly twelve ounces of gold, compared with about nineteen ounces in early 2024.

Measured in gold rather than paper, Sapozhnikov argued, the American stock market has shed approximately a third of its value over two and a half years, precisely the stretch during which it repeatedly set nominal records. Both descriptions, he said, are accurate expressions of the same market in different units, and the gap between them is where the substance of monetary economics resides.

The Problem With a Currency-Based Yardstick

Sapozhnikov wrote that every market price is in fact a ratio, and that while investors and governments tend to treat the price as moving while the unit of measure stays fixed, both sides of the ratio are always in motion.

He said the consumer price index treats the money side as the fixed reference and records every movement against goods, an assumption he described not as a technical detail but as the entire content of the statistic. A measuring system built on the currency, in his view, is structurally unable to register what happens to the currency itself.

While the Austrian school of economics is often dismissed as pedantic on this point, Sapozhnikov argued that the objection stops being pedantic once one recognizes that the yardstick has an owner with policy objectives.

He identified a second problem: the agency redefines and adjusts the index’s internal weighting and calculations. In January 1983, he noted, the BLS stopped pricing owner-occupied housing by what houses cost and switched to rental equivalence, an estimate of what an owner would hypothetically pay to rent his own home. In 1996 the Boskin Commission concluded the index overstated inflation by about 1.1 percentage points a year, after which the BLS adopted geometric-mean formulas at the lower level of aggregation and steadily broadened hedonic quality adjustment, which discounts a price increase to the extent a product is judged better than the one it replaced.

Sapozhnikov said these adjustments have merits and stated he was not alleging fraud, but rather pointing to a pattern: every major revision of the past forty years has lowered measured inflation relative to the method it replaced, and each was adopted by the institution whose fiscal obligations, including Social Security, tax brackets and indexed debt, are escalated by the resulting number.

He argued this is visible in the July report itself, noting that shelter accounted for roughly two-thirds of the monthly increase and that the largest single component of shelter is not a price anyone paid but imputed rent on houses that are not for rent.

Gold as an Unadministered Reference

Gold, Sapozhnikov argued, carries none of these problems. He said there is no methodology board, no seasonal adjustment, no annual reweighting and no revision window, not because gold has a constant value, which he said it plainly does not, but because nobody owns its definition. An ounce in 1932 and an ounce today are the same object, he wrote, and that is the only property required for the task. Auditing a currency, he added, requires a reference the currency’s issuer does not control, and denominating the Dow in ounces produces a series no institution administers, adjusts or has an interest in.

Applying the Dow-to-gold ratio across history, Sapozhnikov said the analysis aligns closely with key economic and market inflection points, swinging between extremes that mark the turning points of the twentieth century.

He noted that in September 1929 the Dow was worth about eighteen ounces, and by July 1932 it was worth two. In February 1966 the Dow reached 995 while gold stood at $35 by statute, about twenty-eight ounces. By January 1980, with the Dow near 875 and gold spiking to $850, it was worth roughly one. In August 1999 the Dow crossed 11,300 against gold near $255, more than forty ounces and the highest reading on record. By 2011 it was back to about six.

Sapozhnikov said this conceals a stark reality from the average investor: in dollars the account is at a record, but in purchasing power over the one asset no central bank can print, a third of it has been given back since 2024. No brokerage statement reports the second number, he said, and no inflation release will ever contain it.

Where Inflation Enters First

Sapozhnikov argued that the Dow-to-gold ratio is the true measure of inflation and also reflects where inflation appears first and strongest. Newly created credit, he wrote, does not raise all prices at once and in proportion; it enters at specific points, first where the credit itself goes, into long-duration assets whose valuations depend on a discount rate. Equities, real estate, long bonds and ventures that only pencil out at low rates all inflate long before the effect reaches the supermarket. A consumer price index, he concluded, is therefore not merely an imperfect instrument for detecting monetary expansion but is pointed at the wrong place, measuring the last stage of a process whose first stage is the whole story.

A Falsifiable Test

Sapozhnikov offered a falsifiable test of the Dow-to-gold ratio. He said the lows of completed cycles fall in a straight line, about two ounces in 1932 and about one in 1980, roughly half a century apart with each half the last, and that extending the line implies the current cycle terminates near half an ounce some time around 2030.

He stated that if the ratio turns up from twelve and exceeds the 1999 high above forty without first reaching single digits, the thesis is finished rather than merely weakened, with no reweighting, substitution effect or revision window available to him. That, he said, is the price of using a rod somebody else cannot rebuild, and it is a price worth paying.

Sapozhnikov said the July CPI report told observers the rod is behaving and could not have told them anything else, and that learning what the rod is made of requires measuring it against something no committee maintains.