Gold’s run impressively up

September 9, 2009

All the goldbug fever, not withstanding today’s pullback in the yellow metal’s price, got me thinking about just how well has gold stacked up against say stocks and oil over the longer term. I picked 2004 as a starting point for no other reason than it gives enough distance from the mania of the credit bubble and the distortion of its popping.

Gold’s trajectory is pretty impressive. Now whether you think that means it’s bubble that never fully burst or whether it’s indicating a longer term trend in which enough investors want a hedge against inflation further down the line is another matter. But, since 2004, it’s been mostly up.

Check it out.





Dow Jones Industrial Average



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Interesting one. I can’t quite make out the detail, but get the jist. Overlaying these 3 graphs could be interesting, maybe over a longer period before 2001. Also, my subconscious tells me platinum is out there too. It keeps bringing me back to the question of ‘standards, reserve currencies’ and global market supply and demand, which I don’t fully grasp.

Posted by Casper | Report as abusive

Two things to consider with a run-up in metals.
1) It’s a great time to sell gold, you are buying at a high point.
2) based on inflation, starting in 1980ish, I believe the price of gold should be in the $2300 range.
3) Gold is not oil. Oil is consumed and gone forever. Gold is dug up out of the ground, and sticks around forever. IN commercial use, it is recycled (one of those horrible working conditions stories in China, where they melt down old computers to retrieve the metals). If the price goes up, people will simply start bringing in even more gold jewelry then they do now, and the supply will glut. It’s no different then the Hunt Brothers trying to make a run on silver.
Whatever is causing the run-up on gold, just be aware that you are now getting in at the top of an arc, and the smart money is selling it to you and walking away with a profit.

Posted by bob | Report as abusive

I have had great luck selling my old gold jewelry for cash but I recommend shopping around for the best payout. Just my 2 cents. Nice post!

Good points. I suppose these 3 graphics pulls together 3 important/basic economic drivers:

1. A metal that somehow provides emotional and industrial security;
2. Oil drives so many things;
3. The Dow Industrial discounts producer market forces.

I had a thought last night and tested it on some friends: if we take each graph and fit a logarithm on it, we will get 3 different curves. If these are then combined into one log graph, it could become interesting. My gut feel is that the composite graph will flat line or even slope downwards. The latter won’t be good.

Posted by Casper Lab | Report as abusive