Gold Has Outperformed Stocks this Century

July was a good month for gold. The yellow metal was up 2.1% on the month, driven in large part by a weakening dollar and political uncertainty in the US. In fact, it’s been a good year for gold so far. It’s up just over 10% to date.

This is great, but we’re taking a pretty short-term view here. What do things look like if we step back and take in a broader perspective?

Excellent.

It’s been a pretty good century for gold.

It’s easy to get caught up in the day-to-day fluctuations in the price of gold and lose sight of the bigger picture. And when it comes to investing that big picture is key. The price of gold tomorrow probably doesn’t matter too much to you. But the price of gold in 10 years – that might be a bit more significant.

All eyes have been on the stock market over the last several months. The Dow cracked 22,000 this week. Mainstream pundits are giddy. Meanwhile, as an article in Forbes pointed out, gold has actually outperformed the stock market so far this century.

If we index both gold and the S&P 500 to 100 as of Dec. 31, 1999, gold has returned 86% more than the market.

Over the past 17 years, the S&P 500 has undergone two major contractions, both of them resulting in a loss of around 40%. Gold, meanwhile, has held its value well, boosting its appeal as a portfolio diversifier.”

Peter Schiff made this point during an interview on CNBC last spring. When his nemesis Scott Nations insisted that gold wasn’t a good investment, Peter dropped a golden truth bomb on him.

When I started buying gold for my clients in 1999, it was under $300 per ounce. It’s now almost $1,300 per ounce. People who have been following my advice have made money. How many people came on CNBC in 1999 and touted dot-com stocks where they went to zero? Yet you don’t give those guys a hard time. They blew their clients up. They lost all of their money when I was telling people to buy gold at under $300 per ounce.”

As Peter pointed out in his recent podcast, despite the stock market surge this year, there are cracks in the foundation. Economic fundamentals don’t support this stock market bull run.  And Peter isn’t the only one concerned. Over recent weeks, officials from a number of the world’s major banks have warned that the current trajectory is unsustainable, and a crash may loom on the horizon.

We don’t know what the future holds. But as Peter pointed out, if the past is any indication, it’s wise to buy gold.

If you go back to 2001, people who bought gold have much more money than people who just bought stocks. So buying gold, having gold as part of your portfolio, has been a wise choice for investors.”

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