The Gold Rush: Will It Continue?

Over the past 10 years, the price of gold increased by nearly 350%. That’s an annualized rate of return in excess of 16% per year. At the same time, the S&P 500 stock index, including dividends, returned about 0%.  Most investment portfolios would have benefited from an allocation in gold.  Here are four reasons why gold could continue to provide attractive returns for investors:

  1. Hundreds of millions of prolific small savers in growing countries such as India and China have a cultural propensity to invest in gold, often in the form of gold jewelry.
  2. There is a growing distrust of fiat “paper” currency issued by Central Banks around the world.
  3. Physical gold is a private,  personal investment.  For many investors worldwide, the portability of gold is very attractive as governments target tax evasion and money laundering. This demand for physical gold bullion drives gold prices higher.
  4. The emergence of popular gold-related exchange traded funds (ETFs) makes investing in gold cheaper, easier and more convenient for traditional stock and bond investors.

Should you make like a modern day Midas and go for the gold?  Consider that the price of gold remains well below its inflation-adjusted price of the early 1980s and far below the price required were the US dollar to return to the gold standard.  Call us at (727) 744-3614 for ideas on the best ways to invest  in gold.

Price of Gold

Return on Gold vs. S&P 500 10 years ended 5/31/2010 – CLICK TO EXPAND IMAGE

About the Author:

Parker Evans, CFA, CFP, CMT is President of Successful Portfolios LLC, an SEC Registered Investment Advisor Firm based in Clearwater, FL. Parker helps individuals, families, and organizations plan and manage custom investment portfolios at leading brokerages including Charles Schwab, TD Ameritrade, and Interactive Brokers.