I Love Goldhttp://www.fool.com/investing/general/2007/02/13/i-love-gold.aspx Robert Aronen
February 13, 2007
Gold has been maligned as an investment for the past 25 years. Jeremy Siegel points out the lousy investment returns gold has produced in his books, Stocks for the Long Run and The Future for Investors. Who am I to question such thorough research and indisputable facts? Perhaps I'm just a Fool in love.
Better than Google
Stocks vs. Gold: 1968-1981
Better than a dollar
First, the falling dollar and high commodity prices are linked. Most commodities trade in dollars, and as the dollar falls, commodity prices increase. In 2002, gold was trading at around $300 an ounce, and the dollar/Euro exchange rate hit a low of $0.95/Euro. Today, the exchange rate is $1.30/Euro. If the price of gold had remained constant in Euro, it would now be $411 an ounce--accounting for roughly one-third of gold's recent price increase. For the past five years, at least, gold has been far better than the dollar.
Furthermore, with our massive debt and vast trade imbalance denominated in dollars, there are huge incentives for the metaphorical printing presses at the Federal Reserve to run full-time. Furthermore, with the housing market in a tumble, the Fed will have a tough time tightening credit. Beyond current conditions, the presses at the Fed rarely stop. Over the past 50 years, the money supply has steadily increased, constantly draining the dollar's purchasing power.
Money Supply 1959-2006