Gold News

Decade of Gold, Part I

Gold has dominated the first decade of the 21st century. How come nobody's noticed...?

NO MATTER which currency you earn, spend or invest, Gold Bullion has been the best-performing asset class bar none this decade.

I'll say that again, in italics and with an exclamation mark at the end, because chances are you didn't quite catch it:

Gold has dominated the last nine years for investors, smacking everything else in the nose and pulling their ears, too!

Indeed, when finance advisors and investment hacks come to glance back at this decade from their space-capsule/peak-oil/water-logged/much-like-today future (delete as appropriate), they'll see it – in fact – as the "decade of gold".

Just as US tech stocks ruled the 1990s, rising 11-fold on the Nasdaq. Just as Japanese exporters owned the 1980s, up more than six times over on the Nikkei-225. Just as gold itself dominated the 1970s.

Of course, this is hardly a unique insight amongst contrarian investors – meaning those bloody-minded know-it-alls, guided by history, now wagging their fingers at the global financial crisis and tutting "I told you so..." to an audience no bigger than it was (i.e. zero) when they did, indeed, tell you so starting 10 years ago if not sooner.

Hell's teeth, at least one tech-stock heretic – Bill Bonner of The Daily Reckoning – called gold the "Trade of the Decade" just as the decade began.

But even though Bill's call has come good (and come good better even than his blushes would hint), the mainstream investment industry still refuses to notice the cold, hard fact of gold's decade-beating performance.

Take the out-performance of gold for US investors, for instance. Go on – take it! Because nobody in the financial media wants to acknowledge it. Yet this decade, only residential real estate managed to beat gold consistently (excluding costs as well as rentals), right up until granite-n-plasterboard began to flatten and crater in spring 2006.

Housing has since fallen so hard, it barely matches the risk-free return offered by cash since the start of the decade. Yet that risk-free return in itself stands one-third below the previous five-decade average, with the 10-year Treasury yield paying just 4.6% per annum before tax and inflation.

And as for equities, re-investing every red cent of your dividends for the last 111 months would have added only 15% to the capital value of holding the S&P index today. Sadly for buyers of the Big Double Top in US equities, however, 15% hardly makes up for the index halving in price so far this decade.

Whereas Gold Bullion...? We need to be clear: Its historic reign throughout the Noughties is much more than a matter of "Dollar Decline". The deathless, unyielding metal has beaten all other assets for investors worldwide, whether in Euros, Yen, Swiss Francs, Chinese Yuan, Indian Rupees and the erstwhile "Two-Dollar" Pound.

So, Buying Gold nine years ago now looks a very smart move.

But what happens next? With the decade's last summer now peeping across the horizon, is that it for Gold Investment?

Could be. History might well say it's finished. Provided you read it correctly, of course.

After rising six-fold during the Eighties and peaking just shy of 40,000 points in late '89, the Tokyo Nikkei sank by more than four-fifths over the next 14 years, retreating to fresh quarter-century lows just last month.

Following its spring 2000 top, and starting from 17 times its Jan. 1990 level, the tech-heavy Nasdaq sank by three-quarters inside 31 months, reclaiming only half its peak at the bounce and standing two-thirds below there in April '09.

As for gold, a little over 29 years ago it began a two-decade descent...dropping more than 70% from its infamous peak above $800 an ounce – a level breached for just two, short winter days in January 1980.

Over the preceding ten years – the previous decade of gold – its price had shot 17 times higher versus the Dollar. Gold ended the bell-bottomed Seventies some 13 times more valuable in terms of business assets, shooting higher as the US stock market was crushed by record-high interest rates sparked by yet higher inflation.

If this is the top – or damn near it – therefore, the current decade of gold looks a poor (if not late) performer. During the 2000s, gold has risen 5-fold in terms of equities, and gained some 250% in nominal dollars.

So far, gold remains well shy of previous decade-destroying returns.

Keep reading in Part II here...

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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