Are you beginning to get a little tired of TV ads and financial news telling you how attractive gold is and that you ought to buy some tomorrow?
By John A. Schwarz
Are you beginning to get a little tired of TV ads and financial news telling you how attractive gold is and that you ought to buy some tomorrow? They go on to say how spectacular the rise in gold prices has been since 2000, and point out that gold has outperformed every other class of assets.
In my opinion, it’s criminal that they don’t tell the whole story.
The United States, in 1934, set the price of gold at $35 an ounce, and everybody was supposed to turn in their holdings. In 1975, gold was allowed to trade freely, and over the next five years it soared to $850 an ounce. That’s the good news. Gold then started to look like it was being flown by a Kamikaze pilot in the Pacific in 1945. In 1999, it finally cratered 71% lower at $252.
Unlike common stocks, which pay dividends, the holder of gold gets zilch in terms of a cash return. If you bought gold in 1980 at $850 and your neighbor bought stocks, your neighbor cleaned your clock. In the past 32 years, gold has gone from $850 to $1,658. Your neighbor, who you always thought had an attitude, did somewhat better. He bought stocks, also in 1980 when the Dow Jones Industrial Average was at 760. It‘s now at 12,000.
Over the last 32 years, you have not quite doubled your money with your investment if it was in gold. The guy next door, whom you never thought much of, enjoyed an increase of 16-fold on his investment. Imagine what he’s thought of your financial wizardry all these years.
The bottom line is: common stocks have been the best performing assets for over a century.