August 16, 2011
Gold is being touted as an investment opportunity again, in this atmosphere of impending financial doom. Since we deal with long term investment returns, we thought we would look at gold again (see previous blog entry):
Gold (priced per ounce) last hit a record high in 1980, at $850. As of August 12, 2011, gold closed at $1,746, another near record. To make the math easier, I will compute the average annual rate of return from 8/12/1980 (close: $605) to last Friday, 8/12/11: 2.3%. The average annual rate of return from 1980-2010 was 2.93%. The change in the consumer price index over the period 1980-2010 (last available comparison): 3.5%. Why would you invest in an asset class that is unable to beat inflation over the long term?