On Friday, August 25, The Wall Street Journal printed an article which seemed bullish for gold on the surface, but they used some bizarre charts and comparisons to try to show that stocks are better than gold in the long-term – carefully selecting their beginning dates and percentage benchmarks to fit their case.
One chart was particularly bizarre, saying that “In only four of the past 40 years has gold finished ahead of the S&P 500 and Dow when all were up at least 9%.” That 9% benchmark was a tortured attempt to fit the current 9% gain in the S&P 500 into the historical record of “years like this.” But, even to the casual observer, it’s not important which investment goes up the most when all three are going up. What’s more important is what gold does in years in which the stock market goes DOWN. The stock market declined significantly (by double digits) in 1973, 1974, 1977, 2002 and 2008. Gold was up strongly in those years.
Why didn’t the Journal include a chart like this? Why didn’t they include a long-term comparison of gold and stocks – like we do here below – showing that gold is up 350% vs. just 66% to 90% for stocks since 2000. At the end of their article, they did admit that gold outperformed stocks in the years before and after the terrible 2008 crisis, the worst since the 1930s: “Stocks gained 23% and gold 24% in the crisis-recovery year of 2009, and 2010 told a similar story, with stocks up 13% and gold up 30%.”
If you put all those numbers together, gold gained 68% in 2008-10, while stocks fell 9% in 2008-2010.
The Journal’s main chart was also somewhat misleading, saying “Gold this year is rising faster than the S&P 500 for the first time since 2011, as investors resort to an investment that offers no claim on profits and yields no periodic return, reflecting rising perceived uncertainty.” Wow! “No profits” and “no periodic returns”?
Gold is up 350% since 2000 (and silver is up 225%). In a world of ultra-low interest rates, it is irrelevant to say that gold offers “no interest income,” since short-term money in the bank offers microscopic yields with none of the capital gains potential of gold and silver. As for “perceived uncertainty,” that is only one of gold’s many roles in the world. Wall Street loves to color gold as a “metal of fear,” when about half of all demand comes from jewelry, by which newly-wealthy people buy beautiful gifts for their loved ones!