Certainly RS'ers have not failed to notice the continued rise of gold prices. Back when I started purchasing gold at the beginning of 2006, it was priced at around $560-$580 per ounce. It has set another record today, reaching $1720 per ounce.
I thought a bit about how gold compares to other investments (and again, keep in mind that I understand that gold is not an investment in the traditional sense of the word.) I look at it as a hedge against inflation, and speculating on the government making poor economic decisions (not much of a gamble, right?)
When Nixon closed the gold window in August 1971, gold was priced at $35/oz. At this time, the DJIA was around 900 (908 on August 27th.
With the DJIA today at 10926.33 and gold at $1714:
Gold has produced an annualized rate of return of 10.2% over the last 40 years
the DJIA has produced an annualized rate of return of 6.4% over the last 40 years.
I chose 40 years, not to cherry pick data, but simply because this was when the US defaulted and let the price of gold float freely.
What do you guys think? Why has gold outperformed broad stock indices in the US so significantly over the past 40 years? Even if you look at gold from '71-'99, when gold hit a 20 year low of $252, you still get a 7.3% annualized return (riding the DJIA bubble over this same period would have netted you 9.1% if you timed it exactly right).
Also an interesting note: The DJIA in 1999 was only about 300 points lower than it is today. The college grads who began investing for their retirement in 1999 have seen no return on their investments (and since their dollars are less valuable now than they were 10 years ago, they have actually lost ground.) I remember back in those days people were saying that the stock market, in the long run, always goes up, and that the stock market was the sure-fire was to save for retirement over the long haul.
I thought a bit about how gold compares to other investments (and again, keep in mind that I understand that gold is not an investment in the traditional sense of the word.) I look at it as a hedge against inflation, and speculating on the government making poor economic decisions (not much of a gamble, right?)
When Nixon closed the gold window in August 1971, gold was priced at $35/oz. At this time, the DJIA was around 900 (908 on August 27th.
With the DJIA today at 10926.33 and gold at $1714:
Gold has produced an annualized rate of return of 10.2% over the last 40 years
the DJIA has produced an annualized rate of return of 6.4% over the last 40 years.
I chose 40 years, not to cherry pick data, but simply because this was when the US defaulted and let the price of gold float freely.
What do you guys think? Why has gold outperformed broad stock indices in the US so significantly over the past 40 years? Even if you look at gold from '71-'99, when gold hit a 20 year low of $252, you still get a 7.3% annualized return (riding the DJIA bubble over this same period would have netted you 9.1% if you timed it exactly right).
Also an interesting note: The DJIA in 1999 was only about 300 points lower than it is today. The college grads who began investing for their retirement in 1999 have seen no return on their investments (and since their dollars are less valuable now than they were 10 years ago, they have actually lost ground.) I remember back in those days people were saying that the stock market, in the long run, always goes up, and that the stock market was the sure-fire was to save for retirement over the long haul.