Back in 2003, our client portfolio co-manager, Scott Campbell, highlighted what mean reversion meant for gold-

“The long term average of the Dow Jones Industrial Average: gold price ratio is 5:1 that is for every $1 per oz you pay for gold, the DJIA should be 5 times that number. This is so easy, everyone can work if out while they’re taking a shower each morning.” So now you know what the word’s #1 portfolio manager does in the shower each morning but even more shocking when the price of gold was less than $ 300 per oz was the idea that gold could climb up above $ 2000 or that the DJIA could fall so much from its perch above 10,000. Now either scenario seems quite shocking. But don’t forget that 5 is the average, to get there expect an overcorrection this might almost reach parity – so the next turning point could easily see gold ultimately attain our target of $ 1,500-20,000 per oz or more- but equally if could see the DJIA fall to 1,500-2,000 or less. That would be a very mean reversion indeed.