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In the
end as an investor, it's all about the scoreboard. For those who aren't
traders, allocation to the correct asset classes is critical to long-term
returns. Following are the returns for the S&P 500, the U.S. Dollar
(using the Dollar Index as a proxy), Commodities (using the Continuous
Commodity Index [$CCI] as a proxy) and Gold. These returns ignore dividends,
yields, and expenses, which are important concepts over the long-term and
make this a less than ideal comparison. You can plug in whatever figures you
think are appropriate and make your own comparison(s) if you're so inclined.
How is it
possible that a hunk of metal has returns comparable to the stock market over
the past 15 years? Does this surprise you? Are you familiar with the Dow to Gold ratio as a long-term concept? If
not, perhaps it is not too late to familiarize your self with this concept,
especially since the Dow to Gold ratio will drop to 2 at a minimum and may
well drop below 1 this cycle.
Here's an
up-to-date log scale chart of the Dow to Gold ratio over the past 5 years:
 
The
long-term chart (20 year log scale candlestick chart) of Gold shows a strong
bull market with no trend line breaks over the past 8 years and with aligned
and rising 50 and 200 week moving averages:
The bull
market in stocks and commodities is no longer in force using basic chart analysis.
Things are always subject to change, of course, but with a trailing P:E ratio
of 150 (based on
reported earnings, not the garbage operating earnings spewed by CNBC
bulltards) and a very weak global economy, stocks and commodities will likely
not resume a secular bull market any time soon. This is also the message in
their long term charts (following are 20 year log scale charts of the S&P
and everyone's favorite commodity, oil [$WTIC]):
Since the
Dow to Gold ratio will get back to 2 (at a minimum), those who sell their
general stocks and buy physical Gold will be able to trade their Gold for at
least 5 times the number of stocks within the next decade. This is equivalent
to a 400% gain in stocks over a decade or less without taking the risk of
owning stocks! The Gold bull market is alive, well, and not close to being done
in time or price.
Adam Brochert
GoldVersusPaper
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