Not a good example… Gold topped out at $2700 a few weeks ago and would buy you over 2200 lbs of rice.
I’m not sure that chart is as useful as I thought it was, since it compares gold price to the CPI rate, not the actual average cost of goods. There are all kinds of more revealing charts that show gold prices compared to cost of goods, compared to inflation-adjusted prices, and compared to “fair value” benchmarks. In general I think the Forbes article provides a good overall assessment.
Just for fun I looked at the price of gold (not inflation adjusted) in the middle of the 20th century and again in 1974, which was a few years after gold started a dramatic rise in price for the first time. Then I compared those prices to modern dollar equivalents using a US inflation calculator.
In 1950 (average) the price of an ounce of gold was $34.72.
An item that cost $34.72 to buy in 1950 would cost $454.77 today.
By 1974 (Oct) the price of gold had soared to $159.98.
An item that cost $159.98 to buy in 1974 would cost $1024.34 today.
The price of gold today (as of October) is $2746.70.
What this tells me is that (1) from those two benchmark time periods to today, gold has greatly outpaced inflation, and (2) the pundits who are saying that gold is greatly overpriced today relative to inflation-adjusted “fair value” are probably right.
no doubt. But if we are getting to the point where the US government is defaulting on its debts and publishing misleading CPI numbers, something has gone very seriously wrong, and you might be better off stockpiling guns, ammo, and food, rather than worrying about your retirement funds.
These would be the vehicles owning all that vacant office space as the world is switching to WFH? Or all the vacant retail space as the world is switching to e-commerce? Sounds like an excellent way to lose your a$$.
REITs investing in AirBnBs and robber baron-controlled apartments might have a better outlook.
WFH is shrinking, not growing, but that is a good point that there is some form of conversion of office space happening and it remains to be seen what that is.
Still, there’s a variety of REITs, only a fraction are office space focused. You shouldn’t invest in anything without looking at it and understanding the specifics.
On the other hand, unlike gold, real estate can also generate money. That’s the problem with gold: it doesn’t actually do anything.
Of course, there are costs associated with holding gold as well, particularly the need to secure it.
Yep. That line is just more propaganda and mistruths from gold bugs, who thing gold is a magic thing, not just another commodity.
But it isnt really gold or a quarter- it is how long you have to work to earn either. That is the false analogy. Min wage 1978 $3.68/hr, today= $16.00.
So does gold, if you have more than a few ounces.
100% true for a laborer.
But for a retired person (or serious fatcat) living off owned assets and their financial income, a $X nest egg in stocks and/or bonds will buy half as much goods after inflation doubles the CPI. Yes, during that time the stock market may move, but in periods of severe inflation it has not tended to keep up. And bonds (other than inflation-compensated bonds) of course tend to be slaughtered.
Not at all, nor have I advocated owning no gold. I think you missed the part of my post that cited a favorable return for gold investors vs the S&P 500 IF one bought gold in 2000.
Personally my gold exposure is via an ETF. No costs to secure it. I suspect I am pretty typical in today’s world.
Sorry I misunderstood your point.
That’s reasonable, though the post I was replying to was talking about the costs of owning land outright, which is why I made the comparison to owning gold outright. If instead we’re talking about owning a gold ETF, the fair comparison would be to owning a real estate ETF.
that’s true, but it can also be said about non-dividend paying stocks
Yes. And REITs have expense ratios. Because of the costs of selection and the costs associated with holding real estate.
Maybe for a very generous interpretation of “more than a few ounces”. Even a smallish medium sized safety deposit box in a bank’s vault, about the size of a small desk drawer, could easily hold 20 standard 1 kg gold bars, probably more. At a current value of around $85,500 each, that’s $2 million or more worth of gold, and the annual cost of the box is practically peanuts – like maybe $60.
A much greater cost, if one was so inclined, would be the security involved in transporting the stuff to and from the bank. Presumably it wouldn’t happen often. It’s probably more practical to own some type of gold certificates or other proxy for the actual stuff.
As one who was living and studying secondary school economics in the 70s, I find that statement both correct and amusing.
Everything is relative. When I purchased my first house in 1980 I was lucky to get a mortgage at only 18%. In contrast, my nephew just purchased his first home and got a loan at 6% and was very unhappy because it was up so high compared to the past few years. As I said, it’s all relative.
Until I misplaced it somewhere, I had a booklet of mortgage amortization tables from the early 1980s – an era that I lived through, and amortization tables that I actually used. The tables went up to a maximum interest rate of 25%.
The question has two parts: (1) What is a hedge? (2) Is gold a good hedge?
Suppose you are offered two investments, A and B. Each has a 50% chance of tripling (compared to a basket of your favorite consumables) in a year, and 50% chance of going to zero. If these events are perfectly correlated, it matters not what combination of A and B you choose. Your average gain will be 50% but half the time you’re ruined.
If A and B are perfectly anti-correlated invest equally in each, for a guaranteed 50% return. If there’s no correlation invest equally in each. Again your expected gain is 50% but you’re ruined only a quarter of the time.
This simplistic example ignores the complexity of portfolio diversification. You might want to put 40% into U.S. stocks, 15% into U.S. bonds, 10% into foreign stocks, 5% into gold, 5% into silver, 15% into REITs, 10% into Bitcoin (totally random example).
DIVERSIFY (i.e. make “hedge” bets) to safeguard your wealth. Instead pick 1 or 2 good bets if you want to get rich quick!
Lately many asset classes are rising. Gold is still near the all-time high set a month ago; U.S. stock averages are essentially at all-time highs. Bitcoin set its all-time high just a few hours ago! Even silver is near a 12-year high. And all these dollar-based highs are not due to a weak dollar. The Dollar has risen recently compared with Yen, Euro, etc. Foreigners are pleased to invest in the U.S., owning about 20% of U.S.'s stocks and bonds. They’re not particularly worried about political dysfunction in the U.S.: The U.S. is so dominant that its problems will cause severe problems around the world.
None of which answers your question! If the stock and Bitcoin booms continue, gold is unlikely to keep up. When the cataclysm finally comes, gold is likely to outperform the U.S. dollar and stocks. Even that much advice is worth less than what I’m charging for it! 
If that’s your measure, then you ought to be stockpiling rice, not gold.