[Pilsner]

Many on FR have been dismissing gold all way up from $275.

Gold is a terrible investment. Except for when it isn't. The gold bugs have been peddling, gold with the exact same arguments, with the exact same predictions of impending financial doom, since the last time gold was this high, more than a quarter of a century ago.

If you bought gold for $650 an ounce in 1980, congratulations! Gold is now over $800 an ounce. Of course, with inflation, it takes $1,644.64! to equal the purchasing power of $650 in 1980, so your real return on your 27 year investment is a loss of more than 50%.

Are there times when a person can make a killing in gold? Sure. Is investing in gold a highly speculative proposition? By definition. Volatility in the price of gold is what allows it to sometimes go up rapidly enough to generate a large short term profit. That same volatility allows the price to go down rapidly, creating a large short term loss.

[editor-surveyor]

"Gold is a terrible investment. Except for when it isn't."

Gold is never an investment.

Gold is a hedge against bad government, and interesting times (like right now). It's something that you exchange for something more useful when good government takes over. Look for $1800 gold by this time next year.

[Lokibob]

“If you bought gold for $650 an ounce in 1980, congratulations!”

Interesting you picked a $650 date instead of 10 years ago, when gold was at $335 or so.

You can manipulate figures anyway you want.

.....Bob

[ghostrider]

You can make the same arguments about nearly anything, if you pick and choose the times. Predictions of financial doom are not illogical in our “not so free” world markets where immense power and control is exercised from behind hidden veils to the benefit of specialized political objectives. In the long run, it is very logical that investors lose confidence in traditional investments which they see being cheapened by irresponsible leadership. Over the long run, there was never any question that the US Dollar would fall. And, it was a certainty, that gold would rise when the dollar fell. I was told to use gold as an insurance policy to insure against a crashing dollar. If the dollar did not fall, then the lost appreciation and interest could be viewed as the insurance premium. When the eventually dollar tanked, then the gold appreciation would be like the insurance payout. So far, it has worked perfectly.

[eyedigress]

Good thing I bought in 2003.

[RockinRight]

Gold is not an investment in the sense that stocks, bonds, or yes, even real estate, is.

Gold is a hedge.

[simon says what]

Is investing in gold a highly speculative proposition? By definition. Volatility in the price of gold is what allows it to sometimes go up rapidly enough to generate a large short term profit.

Highly speculative how ? Volatile how ? Like NASDAQ from 1000 to 5000 in 4 years ? Investing in Gold is not a short term profit scenario. Gold's assent to higher prices is driven by economic fundamentals such as the government inflating the money supply, cyclical ebbs and flows of mine production, low real interst rates. These cycles build up over time just like market fundamentals that favor stocks build up over time. They take decades to play out.

Gold is a terrible investment. Except for when it isn't.

Those times of when it "isn't last for years though. If you bought an equal dollar amount of Gold and the S&P 500 Spider ETF going back 1,2,3,4,5,6,7,8,9, or 10 years ago today, you would have done better with Gold. Now the 20 years before that you would have done better with the S&P 500. These cycles go in multi-decade increments. I do not think we will be done with this cycle until Gold is in the low to mid 1000's of dollars.

GOLD = GREEN      S&P 500 = BLUE

Since 11/6/2006, Gold has outperformed the S&P 500 by approximately 35%.


Since 11/6/2005, Gold has outperformed the S&P 500 by approximately 60%.


Since 11/6/2004, Gold has outperformed the S&P 500 by approximately 55%.


Since 11/6/2003, Gold has outperformed the S&P 500 by approximately 70%.


Since 11/6/2002, Gold has outperformed the S&P 500 by approximately 155%.


Since 11/6/2001, Gold has outperformed the S&P 500 by approximately 200%.


Since 11/6/2000, Gold has outperformed the S&P 500 by approximately 175%.


Since 11/6/1999, Gold has outperformed the S&P 500 by approximately 150%.


Since 11/6/1998, Gold has outperformed the S&P 500 by approximately 125%.


Since 11/6/1997, Gold has outperformed the S&P 500 by approximately 20%.