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marri

2,397 Posts.

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22/10/16

15:44

Post #: 20051639
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Originally posted by TheLittlePrince ↑

Sun Tzu - "If you know yourself and you know your enemy, you need not fear the result of one hundred battles."

If you price anything back long enough in history (especially commodities) they become worthless as technology has not advanced to access their benefits.

E.g. Imagine the price of Uranium in the middle ages. It would have been beyond useless.

Gold is an interesting object as historically it has been an element of adornment and money.

If you understand the Gold Bug investment thesis then you should look at post 1970 data (post gold standard) and see how gold has performed under the petrodollar system.

Gold was $38.90 in 1970 and is now about $1260. That is CAGR of approx 7.85%.

To compare, the Dow in 1970 was $850, it is now $18150. That is a CAGR of approx 6.8%.

Add in the effect of dividends and you get maybe 9.3% CAGR for the Dow.

Gold does have holding costs so you need to consider this also.

Remember, Gold is seeking a bottom whilst the Dow is looking for a top as indicated by the Shiller PE ratio.

The secular long gold argument is gaining momentum as the US approaches $20T in debt and the woes of Fannie and Freddie strain the Fed balance sheet.

Financially modelling is yet to show how the Fed will remove these assets without de-stabilizing the economy.

My point is, the "Numbers don't lie" article is useless given the current investment thesis for Gold rests on the fault of the petrodollar system. The author clearly does not understand the modern investment thesis for gold by providing such data and thus disregarded Sun Tzu's advice.

Done.

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Hi Lp
Not being picky but when the fixed price of Gold was completely abandoned the POG virtually doubled in a few months.Perhaps taking the first free market POG as a starting point is more realistic.This would lower Gold's performance somewhat.
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0 Great analysis

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