Mel Gladstone, the founder of Financial Connections’ predecessor, once said to me, “people always talk about gold but why wait 10-years for it to pay off?”
Many investors fearing inflation and economic uncertainty are buying gold futures, gold coins, gold stocks, etc. Gold rose over 75% since fourth quarter 2007.
But there are alternative ways to address these issues. Gold, after all, doesn’t produce income, if you hold bouillon it costs money to store and its value can’t be calculated intrinsically but rather through investor bidding.
While gold did appreciate substantially in the late 70s, it has been dormant until the last few years. It’s last peak was in 1980 at $667 per ounce. It’s current price is approximately $1,500 per ounce. This is a 2.7% annual return. The Consumer Price Index over the same period was 3.2%. So, it didn’t work as a hedge against inflation. The S&P 500, over that same period, returned 11% annually (including dividends reinvested).