Has Gold Been A Good Investment Over The Long Term? A long-term owner of gold here. I think the question asked is wrong.
AU is not an investment -- good or bad. Its insurance. What is the rate of return on homeowner's insurance to someone who never files a claim? (hint: its a negative number, as cash only goes out, and does not come) Does that make homeowner's insurance something to be avoided? In a precise sense, purchasing insurance is not "investing", its an outlay, an expense. In return for the outlay, you are obtain protection for an asset.
AU is similar. You decide on an appropriate allocation, you incur an outlay. The difference being, with AU (unlike homeowner's insurance) after several years of holding it, you can decide to liquidate it and get (some portion of) your money back. Try doing that with your H/O insurance premiums....
As to dryflower's comment about a miniscule ROR on AU over 'thousands of years'... First, my investment horizon is not that long. Second, directly to D/F's point, if you were WERE sitting (for example) in pharoanic Egypt circa 1500 B.C., or 200 B.C Carthage, and invested in loans to the pharoah (i.e. Treasurys), fertile farm acreage and tenement apartments (real estate) , or the local camel merchant (equity ownership in commercial enterprises, i.e. 'stocks') ...then here come the Romans, they kill the camels, topple the govt, set fire to your buildings (real estate) and seize the lands (or in Carthage's case, 'seed' the land with salt to make it unusable).
What is the ROR on THOSE investments once title has been seized or property destroyed? (hint, if your equity in an asset goes to $0, its gone, forever.)
The camel merchant who sold his camels the day before the Romans landed, could easily hide the proceeds from that sale (gold coins), throw them a bags, walk them out into the desert somewhere, bury them by night (perhaps in sundry locations, to thwart burglars, and come back in a year or two, and his AU and wealth intact. Still not impressed? Fair enough, but what is the ROR (or current value) on an IOU from the last, deposed sovereign of Carthage? --- 10 years before he was deposed, all Carthaginians assumed the sovereign's IOU was AAA-rated...
The above story is tongue-in-cheek, but meant to get the point across about AU being insurance, not an investment. AU, because of its inherent attributes (universally desirable -- among all cultures past and present, relative scarceness, indestructability, portability) makes it a unique diversifier against the potential ravagings of conventional investment assets, WTSHTF.
We all may lucky enough to NOT experience a "Mega Black Swan" event. And our houses may never burn down. [I also have stocks, and bonds (in far greater value than my AU -- so please don't consider me a 'gold bug', any more than I am a 'stock bug' or a 'bond bug'. ]
Like Henry Walton Jones Jr, I am "a cautious fellow". I renew my H/O insurance each year and I hold some AU. I consider neither to be "investments"; I consider having some of both prudent.
Why Active Managers Fail (And Why You Shouldn’t Fire Them)
Has Gold Been A Good Investment Over The Long Term? @rjb112(1) Since you are familiar with Siegel's book, do you have any reason why a supposedly scholarly undertaking like this fails to identify on its central chart which T-Bill maturity the plot-line reflects? The difference would be small. But I'd have more confidence in his numbers if I knew the methodology employed to reach them.
(2) I think we agree that gold is not an attractive long term investment.
(3) I think we also agree that over shorter periods (such as the referenced 1
5 year time-span) gold does sometimes perform quite well when compared against some other investments.
I'm not sure we disagree on anything of substance here.
hank, I don't know the answer to your question in (1). I strongly suspect the answer to which Treasury Bills were used will be found in Chapter
5, where he says, "In Chapter
5 we examine the details of these return series and see how they are constructed."
I don't have the time nor inclination to read that chapter. I don't own the book, but have it available thru the public library e-book series.
I agree with you when you say "The difference would be small." Since he refers to short term bonds as having the 2.7% annualized real return, he is equating the Treasury Bills he used for the chart to short term bonds. Perhaps he used one year T-bills? I have no idea, and agree with you that it would be much better to have that stated outright. I would also like to see the bonds identified....such as 30-year Treasury bonds, and even the stocks identified. That's where I'm guessing Chapter
5 comes into play.
I agree with your (2) and (3) above........certainly over the past 210 years, gold has been a terrible investment, but also, nobody has lived 210 years to hold it that long and achieve that terrible return. So if you bought gold in January of 2001 and sold it in 2011, you did fabulously. If you bought gold in 1980 at over $800/ounce and sold it in 2000 or 2001 at under $300/ounce, you did terribly.
All these things, including small cap value stocks, large cap growth, value stocks versus growth stocks, foreign stocks vs. US stocks, emerging market stocks, etc etc......are quite time period dependent. Large cap growth did great from 199
5-2000, then did terrible, while small cap value did great starting 2000.........
Actually, I don't think we disagree on anything here.
And I'm not against gold.
Some of my favorite investors have invested in gold, such as Jean Marie Eveillard, the late Peter Bernstein, William (Bill) Bernstein, and others. I think Buffett may have even invested in gold or silver at one time. And John Templeton I'm pretty sure bought silver at one time.
And you don't have to look at gold as something you invest in to hit a home run with respect to total return. Many invest in it as an insurance policy against bad outcomes.
take care
Has Gold Been A Good Investment Over The Long Term? @rjb112I do not wish to read Mr. Siegel's book. However, I'd consider it condescending for anyone to suggest that, not having read the book, I'm unfit to offer some constructive comments on the question under discussion.
(1) Since you are familiar with Siegel's book, do you have any reason why a supposedly scholarly undertaking like this fails to identify on its central chart which T-Bill maturity the plot-line reflects? The difference would be small. But I'd have more confidence in his numbers if I knew the methodology employed to reach them.
(2) I think we agree that gold is not an attractive long term investment.
(3) I think we also agree that over shorter periods (such as the referenced 1
5 year time-span) gold does sometimes perform quite well against some other investments.
I'm not sure we disagree on anything of substance here. I do feel the chart as presented exhibits sloppy scholarship for its omission of which T-Bill maturity was used in the calculation, But, that's my subjective judgment. Others can form their own opinion.
Real Estate Funds and Turnover Hmm. The fund in question is one I own. ARYVX. It has done very well but looking at it recently I noticed it had 275% turnover. Maybe this was a one year thing? That is why I wondered where I could get previous years turnover rates.
