There are so many holes in this nonsense I had to comment.
If gold only rallies when people lose confidence in government then explain to me how gold rallied from $250 to $1000 during a period of time where confidence in government was as high or higher than it’s ever been?
And according to the author cars have rallied 300% and the Dow 16,000% and that proves that they are both much better investments than gold in an inflationary environment. Maybe I’m not doing the math right, but the Dow rose from around 1000 to 18,000 during the period from 1970-the present. That’s a respectable 18 fold gain. But gold rose from $35 to $1900. Unless my caculator is broken that’s a 54 fold gain. Gold is so far ahead of stocks in preserving purchasing power that they aren’t even in the same league. Even if one were to calculate the number from Friday’s price after a 4 year bear market gold has still delivered a 32 fold gain to the Dow’s 16.
There is one reason, and one reason only why the price of gold goes up over time. Because governments and central banks print too much money. Some times that money will go into undervalued, and or new industries like it did in the 80’s and 90’s with the invention of the personal computer and internet, and some times it flows into commodities when there is no new emerging industry to soak it up. But there is no question that over the long haul, through both bull and bear markets gold massively outperforms almost all other assets in protecting ones wealth from the depredations of government counterfeiting.
If you talk about all time confidence in government, an arguement can be made that it peaked on Sept 11, 2001
Gary,
I like that author- he’s a brilliant guy, and he’s right more often than he’s wrong. But, I don’t always agree with him. When folks make this argument of how much something went up vs. the other thing, it totally depends on the starting point and also the ending point and in which currency that is the basis of the comparison. But in general, no asset protects against inflation when you buy it at the wrong price/ and or wrong time. Anyone who bought gold in Jan. ‘1980 or Sep. 2011 protected themselves against anything except making money. Same goes for buying stocks Mar. 2000, Oct. 2007, etc., etc.
You are correct. One can easily cherry pick an entry at the top of a bull market or bottom of a bear market to support their view. That’s why I went all the way back to 1970. Both gold and stocks went through two bull and bear cycles, and gold outperformed stocks by such a larger degree that it’s not even worth comparing the two. I think you will find the same in no matter what currency you measure in.
I will agree with you here. I’m sick of Armstrong and his guru cult like status. So, we’re heading into a period of unprecedented turmoil with governments collapsing, yet, the US stock markets will rocket to new highs like in 1929. REALLY?
Bud Fox,
I checked my records. The GDX calls were a 6% position, but the SLV 2014 LEAPs were 10% Very glad that I took my own trades rather than buying calls back then.
Why don’t you send him your argument. I would interested to read his response.
Well said Gary. You can’t charge a 1% annual management fee on a gold account, thus Wall Street hates it.
Gold rose in 2001-2008 because of dollar decline. Gold sometimes rises and declines for different reasons. Sometimes currency related, sometimes macro government confidence. Not always the same issue.
Guys,
I think this should settle the argument;
http://www.joshuakennon.com/stocks-vs-bonds-vs-gold-returns-for-the-past-200-years/
I think you are talking about the “nominal” gold price. Armstrong is talking about the inflation adjusted gold price two very different measurements.
Johan,
That of course is nonsense as I’ve already shown that from 1970 to the high at 1900 gold rose 54 fold compared to the stock market only rallying 18 fold. A percentage gain is a percentage gain. You can’t adjust for inflation one way when looking at stocks and another way for gold.
If you invest $10,000 in gold and it goes up 54 times, and $10,000 in stocks and it rallies 18 times there’s no way to fanagle the numbers to prove that stocks were a better inflation hedge than gold. Gold didn’t trade freely until 1970 so it’s meaningless to compare the two prior to that starting point.
Bob,
Price is meaningless. I’m talking about percentage change.
Ok fair enough. Rather than tell us ,send him your argument. It would be great to hear his response.
Crude up big time, should’ve held over the weekend but oh well, bought the open based on technicals and fundamentals.
Gold the same story focused on a profitable Gold miner with the best technicals in my book.
He says that the reason gold went up was a lack of confidence in government. If you say that gold goes up because of money printing, then why did gold start it’s bear market descent shortly after announcing QE-infinity?
Nice one Gary . . . About time somebody spoke up and called Martin out on this One !
Good stuff Gary. Now I think everyone and their brother should send Armstrong a bunch of hate mail. Apparently he loves that sort of thing, as it apparently makes him feel more right about his prognostications. Humor the guy. I do know a stock lover personally, and no matter what anyone says, he says with conviction he would NEVER put in a penny in gold. He’s convinced that stocks, especially dividend stocks, are the only way to go, and he’d send you chart after chart of ‘stocks’ for the long run, dating back of course to 1982. Well interest rates have done nothing but fall since that same time, and the US dollar has also debased during that same time, but that is of no consequence to this gentleman. Of course this guy is such an expert he’s never chosen a ‘bad’ stock, and his dividends will provide income streams throughout his retirement, no matter what the price of the stock does. It’s good entertainment just sending this guy stuff about gold, to see how he will react. He pretty much thinks I’m an idiot to be in gold.