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Wall Street Still Doesn’t Understand Gold!

gold wall street understandOn 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!

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Chris

Too bad this article is guilty of the exact same cherry picking they accuse the WSJ of doing — but then again they have to do that to sell gold as an “investment”. People who don’t understand the difference between buying gold for security and stocks for investments shouldn’t be doing either. Yes, you can *trade* in gold to make money, but that’s no different than trading in anything else like stocks or pork bellies, its *trading*. Again, if you don’t understand the difference between investing and trading, you shouldn’t be doing either.

Bob L.

There is a reason why gold (and silver) have been the mainstays of value and commerce since before recorded history. Gold and silver are a physical commodity recognized around the world as that standard. Today, all money is nothing more than digitized, fiat fiction that can become nonexistent with a single keystroke. One reason why out money was once backed by gold and silver was to limit government spending. The value of the dollar was set by the amount of physical gold reserves held by the government. Today, there is serious and well founded concern that the vaults at Fort Knox and the FED in New York are empty, they contents sold off to cover runaway deficit spending and the reason why the deficit ceiling is continuously raised year after year. What most people don’t know is who has been “buying” our debt in recent years, the excess government bonds… Read more »

EVY

So you own gold. What is its value on any given day if you try to use it as currency? Barter…not predictable. Metals should be a very small percentage of a balanced investment potfolio. Fear is a manipulative device to sell gold to people who should be getting guidance from a fee based, reputable investment firm.

O. Ryan Faust

Gold vs stock is apples vs oranges. Owning stock is owning a piece of a company that produces wealth. Gold is a commodity. Owning gold is preserving the value of wealth you currently own by holding actual money (dollar bills are NOT money). Gold only goes up in value compared to other commodities (like dollars). Stock goes up in value because when the company you own a piece of creates wealth, the wealth is leveraged through investments in the wealth-creation process which increases wealth-output and the value of the stock you hold in the company you own a piece of.

There are numerous stocks NOT issued by companies that produce wealth. Many entities issuing “stocks” only shuffle paper back and forth to produce a profit. When the SHTF these issues will vanish like hot air. caveat emptor

Richard A. Tremaine

Who do you think supports the Wall Street Journal. I certainly isn’t gold miners. Wall Street understands Gold all right, they just don’t want to give it acknowledgement. We have been complaining about news outlets and the Media for years now. they are only interested in preserving their own turf. If there is money in the equation some where , there is where you will find the news, news papers and all other media. Let’s just say the news isn’t what it used to be.

Aardvark

This article in the Wallstreet Journal, a mainstream Fake News outlet, is trying to convince average Americans that gold and silver are not worthwhile investments. Always look for the ulterior motive.

Luis-Adam

Love the possible clarity of this article. I’ve been waiting see an article as this. I’ll be buying GOLD this week.