I wanted to share this chart to simply show a long-term historical view of where gold came from and where it is today. These charts are history lessons and they can teach us a lot about markets, society, and what a large group of traders and investors are thinking all at once.
Gold crossed $2,000 for the first time ever and you have to wonder if the precious metal is actually gaining value or if the Dollar is just losing value that fast. This is the question. One interesting observation is to view how gold is doing compared to all the other major currencies.
Is it hitting highs vs. the Euro? Vs. the Yen? Vs. the Pound?
The answer seems to be yes across the board. I have never owned gold, but I have always been fascinated by it because it has a large group of people who believe in its store of value. Watching gold rise here, in my opinion, is the result of the following:
- A store of value - A hedge against inflation - A hedge against the money printing - A way to be long a precious metal that is used throughout society
- A store of value ==> Nope, doesn't do that. Not efficient at all.
- A hedge against inflation ==> May be , since 2008 inflation has been around 2% or less
- A hedge against the money printing ==> Yes
- A way to be long a precious metal that is used throughout society ==> Nope
Since 1974 :
Let's do a simple rough statistical comparison of value gained if you bought US$ 1000 worth of Gold and $1000 worth of DOW Index tracking asset ( Non-Inflation adjusted and Buy&Hold )
For short-term as an hedge then GOLD is OK but i prefer boring bonds, dividend pay stocks & GICs for long-term , Great value is what matters ( ROI )
MikeDelagarza
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Great analysis!
EddyCools
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Well done
SigmaTrading
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Great analysis!
"- A hedge against inflation
- A hedge against the money printing" - with these 2 I agree the most. Once the USD recovers, gold will start moving down towards its equilibrium price.
ZenMode
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Great analysis! Thanks for sharing your work here.
YourLazyTrader
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Good analysis. Looks like Gold will continue it's uptrend till another market crash happens
- A store of value ==> Nope, doesn't do that. Not efficient at all.
- A hedge against inflation ==> May be , since 2008 inflation has been around 2% or less
- A hedge against the money printing ==> Yes
- A way to be long a precious metal that is used throughout society ==> Nope
Since 1974 :
Let's do a simple rough statistical comparison of value gained if you bought US$ 1000 worth of Gold and $1000 worth of DOW Index tracking asset ( Non-Inflation adjusted and Buy&Hold )
Profit from Gold = (1000/180 ) * (2063 -180) = US$ 10450
Profit from DOW tracking Asset = (1000/621) * (27235-621) = US$ 42856
For short-term as an hedge then GOLD is OK but i prefer boring bonds, dividend pay stocks & GICs for long-term , Great value is what matters ( ROI )