Google $500 vs. Gold $1,000

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Fans of round-number milestones were probably cheering as shares of Google (Nasdaq: GOOG  ) traded above the $500 mark yesterday, for the first time in 13 months.

The leading search engine isn't the only one to revisit a significant mile marker this month. An ounce of gold topped the $1,000 mark for the first time in 18 months. 

The dueling milestones brought me back to one of my more regrettable remarks. When both Google and gold were barreling toward the $500 mark four years ago, I chose paid search over precious metal.

To be fair, my choice was based on a 10-year race. We still have a long way to go before November 2015.

However, I'm going to dig myself into an even bigger hole by backing my original argument. I still believe that a share of Google will be worth more than an ounce of gold in six years.

Before I get pelted by the gold bugs, let me explain.

Gold has had a good run, given its resilience as an inflation hedge and the thriving Chinese economy. However, even those following the yellow stuff can't agree whether it's heading to $200 or $2,000

There's a little more clarity with Google, because it's a real company with real earnings. And just as it has done since going public five years ago, analysts see earnings inching higher.






$21.73 est.


$24.75 est.

Source: Yahoo! Finance.

Gold bulls will counter that publicly traded miners such as Goldcorp (NYSE: GG  ) , Yamana Gold (NYSE: AUY  ) , Barrick Gold (NYSE: ABX  ) , and Newmont Mining (NYSE: NEM  ) are also growing their bottom lines, but those targets are based on the market's appetite for the continuing growth of gold. I have greater faith in the growth of online advertising in general and Google in particular.

You show the gold bugs who's boss, Google. But pick up the pace, please. I'm dying over here.

Google is a Motley Fool Rule Breakers pick. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz still uses Google a lot in his daily life. He owns no shares in any of the companies in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

Read/Post Comments (6) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 23, 2009, at 1:22 PM, specsaregood wrote:

    Worth considering:

    #1 - China Encouraging Citizens to Buy Gold and Repatriating Gold Holdings from London

    # 2 -The World's Largest Gold Producer, Barrick Gold Corp, Announced a Decision to Close Its Massive Hedge Book.

    # 3 - COMEX Commercial Traders Have Taken the Largest Net Short Position Against Gold & Silver Ever on Record

    # 4 - Gold and Silver Slipped into Backwardation

    #5 - China encouraging their citizens to purchase Gold and Silver gives the Chinese government a reason to keep the prices from dropping.

  • Report this Comment On September 23, 2009, at 2:35 PM, ozzfan1317 wrote:

    Neither I wouldnt pay more than 300 for google and Gold is a bubble at this point. Carefully selected US stocks are where the real value lies.

  • Report this Comment On September 23, 2009, at 3:15 PM, plange01 wrote:

    gold and google the 2 best short of the year!!

  • Report this Comment On September 23, 2009, at 3:51 PM, RHaganC wrote:

    both overpriced IMO.

  • Report this Comment On September 23, 2009, at 5:35 PM, XMFSinchiruna wrote:

    Hi Rick,

    I bet you had a hunch you'd be hearing from me... ;)

    Who's calling for $200 gold? If you find someone, send them my way. I have some information to share with them. :)

    If you find the macroeconomic case for continuation of the nine-year bull market for gold unconvincing, then consider a more quantitative correlative body of evidence relating to mining costs.

    It costs some $600 per ounce on average to get it out of the ground now, and the all-in cost is quite a bit higher than that. The all-in cost of production is your long-term floor beneath prices for any mineable resource.

    See my discussion of all-in costs here:

    In South Africa, where declining production volume still ranks second worldwide after China, the average all-in cost of production for the nation's producers during the first quarter 2009 was $970 per troy ounce. (R230,000/kg)

    Or, if you prefer, consider gold from a supply/demand perspective. While demand for gold teems, global production has remained in a steady state of decline that is forecast to continue for several years (especially after last year's deep cuts in capital expenditures and resulting mine delays).

    The CEO of a major producer recently noted: “Globally production has been in decline since the peak of 81 million ounces in 2001 to 77 million ounces last year, and we see that decline continuing long term.”

    For those who consider gold overpriced at $1,000 ... please consider the full range of indications to the contrary:

    I have no idea where the price of gold will be in 2015, nor what the impacts of inevitable inflation will be on the nominal price of Google shares by that time, but I remain happy to take the flip side of your bet. :)

    Fool on!

  • Report this Comment On September 26, 2009, at 6:52 AM, BucketOfOnions wrote:

    Chinese stocks are hot. Taiwanese stocks are not. That's about to change.

    Taiwan will hold its presidential election on March 22nd. Barring an extraordinary electoral surprise, Ying-jeou Ma, the candidate from the pro-business and less China-averse KMT will win the election. (Currently Ying-jeou Ma is leading with 63% in Taiwan's political futures market.)

    The relationship between China and Taiwan is best seen as a broken marriage. China wants to reconcile the rift on its own terms, and threatens consequences if that should not happen. Taiwan, on the other hand, suffers from multiple personality disorder. One part of it wants an outright divorce. The other wants to stay separated with the option of eventual reconciliation.

    For the last eight years, Taiwan has been ruled by a president who favored outright divorce. His government has been responsible for hampering economic interactions between China and Taiwan. As the result, Taiwan's economy languished exactly when China was making a great leap forward. Taiwanese stock market is basically where it was eight years ago. But many emerging economies have seen their stock markets double or even triple during that time. It's likely we'll see a catch-up rally once the dust settles after the election.

    Even a surprise win by DPP candidate Frank Hsieh wouldn't be that bad for Taiwanese stocks. He's seen as a pragmatist within his party. Rhetorically, he would still want the divorce. Economically however, he wouldn't mind sleeping with China.


    Money without intelligence is like a car without a road.

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