Gold closed at $999 on Tuesday. Then, yesterday, it closed down $2.
There’s a time to buy gold; and there’s a time to sell it. Which time is it?
The question rose with the gold price itself. It needs an answer.
The price of gold today, adjusted for inflation, is about where it was 26 years ago. After peaking out at nearly $2,000 (again, in 2009 dollars), in 1980, the price fell to the $1,000 level (in today’s money) in 1983.
We were gold bulls back then. And we were idiots. It was the end of the gold bull cycle, not the beginning. The gold price fell for the next 17 years.
Some people draw the wrong lesson from this experience – that gold is always a bad place for your money.
Today’s Financial Times:
“In spite of low interest rates, that make owning gold cheap, the opportunity cost of owning it is still unattractive in the long run. Smarter ways to anticipate inflation include bricks and mortar, mineral rights or even equities, all with vastly superior historical returns.”
But we would prefer to look at it a little differently. Gold is not always a bad place for your money; and we are not always idiotic.
What were the returns from stocks over the last 10 years? The Dow has lost about 15% in nominal terms. In real, inflation adjusted terms, it is probably down nearly 40%. Meanwhile, gold has nearly quadrupled.
Was it smart to buy stocks or bricks and mortar during the ’70s? Not at all. Stocks bounced around, but they were no higher at the end of the…
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Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed and internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily.
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