GOLD VS. STOCKS: 5 YEAR AND 10 YEAR PERFORMANCE CHARTS
Gold closed at $1600 yesterday!
As I have mentioned before, my Dad taught me how to buy stocks when I was in my 20′s. Unfortunately though, gold wasn’t his thing and the most he ever bought was a couple gold coins when we were on vacation. Because he didn’t invest in gold, he never taught me about it either and for that reason it has always been off my radar.
I use the word “unfortunately” because over the last 10 years, gold has absolutely blown away stocks. Gold has been on fire for almost exactly 10 years and anyone who has had money in it should be VERY happy. The only year it didn’t do well was 2008 which was the same year that stocks tanked. Here is the 5 year chart for gold and then the Dow:
photo curtesy of http://www.goldprice.org/
As you can see during the last 5 years, gold has gone from just over $600 all the way up to $1600 which is about a 160% gain. During that same time frame, stocks have gone from about $11,200 to todays close of $12,681 which is about a 13% gain. Quite a difference isn’t it? Then, if you take a look at the 10 year charts for each of them they look like this:
photo curtesy of http://www.goldprice.org
Over the last 10 years the differences are even bigger and it’s astounding. Gold has gone up almost 500% while the Dow has managed only about 28%. Without a doubt, gold has been the better place to invest your money during the last 5 and 10 years. Any time during which there is a lot of financial and political uncertainty, gold usually does very well and often outperforms stocks.
It is never hard to find people who are trying to convince you to buy gold. If you listen to talk radio at all, chances are you will have heard advertisements trying to convince you that gold is by far THE best investment choice. Those ads now are saying that gold will go up to $2,000 and ounce, $5,000 and ounce, and even as high as $10,000 an ounce. I heard one the other day that was trying to convince people that the $10,000 mark is a real reality.
I’m a long time stock guy who believes in stocks. But after looking at those charts it makes me wonder whether I should start buying some gold instead. I have always had some gold mining stocks and those have done alright but not anything near what real gold has done. The problem is that it is always hard to buy anything, stocks or gold, when they are at an all time high.
It looks like the near term future of the USA and the world is going to continue to be rocky. We have such severe financial problems that it will take many years to dig out from under and that will only happen if our politicians can learn to work together: something that doesn’t look very likely. We have an election coming up that is going to be nasty, close to 10% unemployment that won’t go away, debt that is always going to be a huge problem, and people everywhere in danger of foreclosure. It seems to me that those are the exact ingredients that could keep gold going up.
As I said, I hate buying stocks when they are near or at all time highs. But sometimes you’ve got to do it if you ever want to get on board and not miss out.
(full disclosure: The only gold I own is the few coins my father bought many years ago (mentioned above). I will not be buying gold at it’s current price of $1,600 but will seriously consider it if it goes down near $1,500 an ounce again.)
