Friday, January 2, 2009
Gold - an end of the year assessment
Gold as an asset has been the best, most consistent, and least risky investment of the past 8 years. Better than stocks, bonds, real estate and other commodities. The table below lays out the consistent and steady gains for gold that have not been seen with other investment vehicles:
To the people who say gold did not perform as expected during the financial crisis this fall I would say: "scoreboard, yo." While every darling asset class was hammered in 2008, gold managed to eke out a respectable 5.5% gain for the year. Oil was crushed, real estate was massacred, the stock market had little old ladies crying, corporate bonds went below the basement and assets like the dollar and U.S. bonds are Johnny-come-latelies that have fared poorly over almost all of the past eight years.
A shiny-ass piece of metal that has no growth prospects, pays no dividend and has no story to tell or marketing campaign to back it up. We are still in the "stealth" part of this gold bull market. The big money hasn't even been made yet! To have an asset class outperform all others, have positive returns for 8 straight years and get absolutely no respect from the mainstream investment community is the essence of an early bull market. The point of recognition has not even reached the typical mainstream investor yet.
Translation: you can still buy gold for cheap and you can still make a huge return by doing it, as the mania phase for gold has not hit yet. Once the public and mainstream investment community wakes up to gold, the truly staggering price rises will occur. The bull market won't be over until everyone realizes it is the "next sure thing." We ain't even close to this point yet. Most people still think those who invest in gold are terrorists or freaks.
Gold isn't going away and its fundamentals are stronger than ever. I think gold stocks will outperform the metal over the next few years, but both are the only sectors to seriously consider as long-term investments given the current financial climate. I think $2000/oz. is the lowest possible price target and $6,000/oz. before this bull market is over wouldn't surprise me.
For those looking to time their purchases, we are due for a correction in both the gold price and in gold stocks, so you may want to wait a month or so before investing new money into gold and/or gold stocks.
Bought some more SRS yesterday for a short-term trade. Wish me luck...