-- Posted Sunday, 27 September 2009 | | Source: GoldSeek.com
By: Adam Brochert
In the end as an investor, it's all about the scoreboard. For those who aren't traders, allocation to the correct asset classes is critical to long-term returns. Following are the returns for the S&P 500, the U.S. Dollar (using the Dollar Index as a proxy), Commodities (using the Continuous Commodity Index [$CCI] as a proxy) and Gold. These returns ignore dividends, yields, and expenses, which are important concepts over the long-term and make this a less than ideal comparison. You can plug in whatever figures you think are appropriate and make your own comparison(s) if you're so inclined.
How is it possible that a hunk of metal has returns comparable to the stock market over the past 15 years? Does this surprise you? Are you familiar with the Dow to Gold ratio as a long-term concept? If not, perhaps it is not too late to familiarize your self with this concept, especially since the Dow to Gold ratio will drop to 2 at a minimum and may well drop below 1 this cycle.
Here's an up-to-date log scale chart of the Dow to Gold ratio over the past 5 years:
The long-term chart (20 year log scale candlestick chart) of Gold shows a strong bull market with no trend line breaks over the past 8 years and with aligned and rising 50 and 200 week moving averages:
The bull market in stocks and commodities is no longer in force using basic chart analysis. Things are always subject to change, of course, but with a trailing P:E ratio of 150 (based on reported earnings, not the garbage operating earnings spewed by CNBC bulltards) and a very weak global economy, stocks and commodities will likely not resume a secular bull market any time soon. This is also the message in their long term charts (following are 20 year log scale charts of the S&P and everyone's favorite commodity, oil [$WTIC]):
Since the Dow to Gold ratio will get back to 2 (at a minimum), those who sell their general stocks and buy physical Gold will be able to trade their Gold for at least 5 times the number of stocks within the next decade. This is equivalent to a 400% gain in stocks over a decade or less without taking the risk of owning stocks! The Gold bull market is alive, well, and not close to being done in time or price.
The content on this site is protected
by U.S. and international copyright laws and is the property of GoldSeek.com
and/or the providers of the content under license. By "content" we mean any
information, mode of expression, or other materials and services found on GoldSeek.com.
This includes editorials, news, our writings, graphics, and any and all other
features found on the site. Please contact
us for any further information.
Live GoldSeek Visitor Map | Disclaimer
The views contained here may not represent the views of GoldSeek.com, Gold Seek LLC, its affiliates or advertisers. GoldSeek.com, Gold Seek LLC makes no representation, warranty or guarantee as to the accuracy
or completeness of the information (including news, editorials, prices, statistics,
analyses and the like) provided through its service. Any copying, reproduction
and/or redistribution of any of the documents, data, content or materials contained
on or within this website, without the express written consent of GoldSeek.com, Gold Seek LLC,
is strictly prohibited. In no event shall GoldSeek.com, Gold Seek LLC or its affiliates be
liable to any person for any decision made or action taken in reliance upon
the information provided herein.