Gold Since 1982

Dec 13, 2012 in Commodities

Below is price of Gold from 1982 to 2002.   Yes, it underperformed even T-bills and it was obviously a time of great prosperity for the US economy.

 

 

Now let's look at it annually, since 1982 with the larger bold years being those that are the only years the GLD etf has been in existence:

 

 

There have been no negative calendar years yet for GLD (the ETF).    So the big question is:  do you consider Gold a core portfolio holding or a tactical holding?  

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Comments (5) -

Dec 13, 2012 15:28 #

One chart must be wrong. The annual CAGRs in the second chart produce a substantial net positive return over the entire period. The first chart shows a net decline.  Perhaps the first chart is in constant dollars, and second in current dollars?

Baltassar United States

Dec 13, 2012 15:47 #

The first chart ends in 2002 and is meant to just show its a flat-line for 20 years (actually down).   There were up years during 1982 - 2002 but they were offset by down years.

Chris United States

Dec 14, 2012 14:36 #

Depends on what someone is trying to achieve and how much time and work they will put in towards it. For me,  I think all assets are tactical (stocks, bonds, cash, assuming those are the main ones investors typically think of as core). Any asset (including gold)  can stay in a portfolio for an extended period, but I don't get wedded to anything forever. Putting an emphasis on risk management seems to require a flexible approach. Are stocks still a core holding if one was fortunate enough to avoid 2008 by moving to cash or treasuries and not hold them for a year? For an investor who doesn't make a lot of changes, maybe is more strategic than tactical, gold  has a place in  many portfolios until proven otherwise.  Hindsight Smile says those 20 years where gold didn't do anything for you could have been seen early in that dormant cycle while the turn up in the early 2000's also could have been invested if not in its baby or toddler stage than in its childhood period.

jreev42 United States

Dec 14, 2012 15:19 #


I would generally agree.    Earnings and dividends grow over 20-year periods --- stocks can do poorly for extended periods of time if the P/E at start is high and the P/E at period end is low even if earnings do grow.    

Bonds go up on secular (nominal) basis due to their embedded yield but can underperform terribly for long stretches so that isn't much better.    

Gold doesn't have earnings/cash flow and doesn't pay a yield and so it is driven more simply on the propensity of people to hold gold as a % of their portfolio.    The same can be said for some types of real estate where there is value in the asset even though there is no growth in the cash flow.

The blog post was not meant as a knock on gold -- it was meant more as a reality check for anyone that doesn't know the history of gold.

Thanks for comments jreev.

Chris United States

Dec 23, 2012 17:00 #

I see gold more of a store of value, not an investment. The point of of owning gold is not to make money. Instead it's simply to keep your money. More specifically,  retain the purchasing power of your money.

Jeff

Jeff United States

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