I guess if we are cherry-picking start points and end points:
Let’s pick around the day I graduated College: June 10, 1981:
Dow Jones: 993.88
Gold: $465.25
Today: DJIA: 14397
Gold: $1,578.50
So, stocks increased 13.48 times.
Gold increased 2.39 times.
Note: That isn’t Gold’s peak (which was 819), nor is it DJIA low (which was close to 25% lower)
So, when I graduated College, if I put all my money in stocks, I did much better than if I put all my money in gold. If I had any money.
If when the economy crashed by 2009, and Obama got elected, I would have panicked, and sold all my stocks and bought gold, I’d have about doubled my money either way.
Now, do the same for two more cases: The DOW compared to “oil” between 1920 and 2013 ...
That same price of oil compared to the price of gold between 1920 and 2013.
| year | gold $/oz | gas $/gal | gas gal/gold-oz | DJI (highs) | DJI shrs/gold-oz |
| 1970 | 35.44 | 0.35 | 101.26 | 728.23 | 20.55 |
| 1975 | 164.24 | 0.53 | 309.89 | 884.62 | 5.39 |
| 1981 | 464.76 | 1.19 | 390.55 | 1,023.02 | 2.20 |
| 1990 | 352.33 | 1.00 | 353.33 | 2,948.54 | 8.37 |
| 1998 | 292.32 | 1.06 | 275.77 | 9,104.72 | 31.15 |
| 2000 | 282.00 | 1.51 | 186.75 | 10,863.00 | 38.52 |
| 2003 | 355.00 | 1.59 | 223.27 | 9,352.77 | 26.35 |
| 2006 | 600.00 | 2.59 | 231.66 | 11,285.82 | 18.81 |
| 2009 | 945.00 | 2.35 | 402.13 | 8,877.93 | 9.39 |
| 2011 | 1520.00 | 3.53 | 430.59 | 12,569.49 | 8.27 |
| 2013 | 1578.00 | 3.82 | 413.09 | 14,413.17 | 9.13 |
historic gasoline prices in the US: source
historic gold prices: source
historic DJI prices: source
note:
looking at this data, your cost of fuel is roughly the same today as in 1981.. 390 vs 413...
but you can get almost 4 times as many shares of DJIA today as you could in 1981. this could
imply the companies are cheaper/valued in lower value dollars.
Based on the article, it would seem that the price of gold and silver is inflated. Since they are trading on demand, the price can go up dramatically, but it can also go down dramatically.
To determine if gold is inflated, one really needs something to compare it with that tends to resist dramatic swings but nonetheless has a real, lasting value.
Some have suggested that an acre of tillable farmland fits the bill. Decent farmland in our largely agricultural states sells from about 2-3 thousand an acre. That is roughly 1.5 to 2 ounces of gold.
The difficulty is finding the past value of farmland and comparing it to the then value of gold to see what the price of an acre was in gold. (During times when gold didn’t have an arbitrary value assigned by an interventionist government.)