I enjoy the copy of some of the advertising promoting gold:
“in 1920 a man could buy a suit with a $20 bill or $20 gold coin. But in 2006, $20 won’t buy a shirt, and a gold coin, now worth over $500 will buy a suit.”
So what? At 12% (the S&P return during this time according to the MoneyChimp) , your money will double every 6 years. Over 86 years, that’s more than 14 doublings, or over 17,000 times your investment, $340,000 for your $20 bill.
Someone tell me how an ad can make an ‘investment’ that will grow from $20 to $500 in 86 years, an annual return of 3.8%, look good when the alternative (the S&P) would return 680X as much.
From the 1980 peak, gold would have to exceed $4800 to outperform stocks over the same period. I look at the 35 year chart:
and I’m no technician, but ‘down’ looks far more likely than up. Within my market timing article, I discuss how buy and hold will profit if you are patient. Even buying at the market high reached in August of 1987, right before the crash would be profitable if you held long term, returning nearly 8%/yr up to the market bottom of 2003. Now, if you bought gold at $850, in 1980, and were patient, reinvesting dividends* along the way, by now, er, nearly 28 years later, you’d still be short of breaking even.
(*Gold offers no dividend of course. How could it?)