Concerns over the health of the Franco-Belgian bank Dexia added to the bearish mood affecting stock markets yesterday. Dexia’s shares slid 10% on the news that Moody’s Investors Services Inc has put the bank on review for a possible downgrade. Dexia concedes that its large loans to European local authorities prior to 2008 have “impacted the group structurally.”

Britain’s FTSE 100 was down 2.4%, with the pound, the euro and the Swiss franc all losing ground to the US dollar on fears about European sovereign debt, while Hong Kong’s Hang Seng Index finished at a new 52-week low – as did copper and crude-oil futures. America’s Dow Jones Industrial Average lost 2.36% yesterday, and is now down 16.8% from its April high. The index is now just 3.2% away from the 20% decline that many analysts consider signals that a bear market is underway.

In truth, American and European stock markets have been in a bear market since the Nasdaq bubble burst in early 2000. This is best illustrated with reference to the Dow/Gold Ratio – the number of ounces of gold it takes to “buy” one unit of the Dow Jones. As can be seen courtesy of charts at Nick Laird’s website, in 2000 it took around 48 ounces of gold to buy one unit of the Dow. Today, the ratio stands at just 6.4 ounces. The same falling ratio would be evident for other stock markets, and is indicative of the gains tangible assets have made relative to paper assets over the last decade.

Gold and silver prices held up well in trading yesterday, with October Comex gold climbing 2.2% to $1,656 per troy ounce. Silver for delivery in the same month rose 70.9 cents (2.4%) to settle at $30.75. Yesterday CME Group, owners of the New York Comex, announced that its customers would be allowed to post more physical gold as performance bond collateral – raising the amount from $200 million to $500 million. CME also announced margin hikes on copper and platinum futures.