Gold is trading at $2,043 as of this writing and has closed higher 15 out of the last 16 trading sessions. Prior to last Friday’s sell off, gold set a new all-time high the previous nine consecutive trading sessions. That’s what you call HOT!
What is behind the meteoric rise in the gold price? Is the gold bull market a short term phenomenon or should gold be a part of your long term asset allocation? What are some of the best ways to participate in the gold bull market? I’ll be addressing these questions over the next few weeks here at the Joule Financial website.
First, let’s start by making it personal. Do you own any gold bullion or gold coins? Do you own any gold exchange traded funds or funds that invest in gold mining companies? If not, why not?
Now, how about some trivia. I’m sure you would guess that gold has outperformed stocks and bonds both this year and for the past 12 months, otherwise I probably wouldn’t be writing about it. But what about the longer term? Which asset has consistently performed best between stocks (represented by the S&P500 etf, ticker: SPY), bonds (represented by TLT the 20 yr US Treasury), and gold (represented by the gold exchange traded fund GLD)?
Check out the annualized rates of return in the performance chart below. (all data taken from Morningstar.com as of 8/7/2020, dividends reinvested)
Ticker 1yr 3yr 5yr 10yr 15yr
SPY 18.54 12.68 12.20 13.80 9.09
TLT 23.52 13.36 9.00 8.38 7.68
GLD 35.31 16.88 12.76 4.94 10.34
Gold is the winner over the one, three, five and fifteen year time frames. Wouldn’t you agree that this qualifies as substantial long term outperformance? What happens if we take it out to 20 years? Gold’s margin of outperformance explodes even higher.
Since January 1, 2000*:
SPY has gained 5.66% annually
10 yr US Treasury has gained 4.20% annually
Gold has gained 9.26% annually
So let me ask you again, do you own gold? If not, why not? Why does the financial media always pound the table about stocks and virtually never talk about gold or gold mining companies? What place does gold deserve in your asset allocation strategy?
Gold’s rally isn’t for real just because more people are talking about it now. It’s been real for 20 years.
Next week I’ll discuss the various demand drivers/influences responsible for gold’s performance and what the future for the gold price might look like.
Until next time,
*(all data from Jan 1, 2000 through June 16, 2020 https://dqydj.com/, dividends reinvested. To get 20 year performance returns I’ve substituted the 10 year US Treasury for TLT and the spot price of gold for GLD)