Recently our good friends at Casey research published the following chart comparing the inflation adjusted Gold returns to stocks and bonds for the period 1971 through the present. From this chart we can see that as bonds fell during the late 1970′s gold rose equivalently and stocks were basically flat. During the 1980′s bonds rose and gold fell while while stocks rose slightly. During the 1990′s stocks rose sharply gold fell and Bonds were volatile but basically flat to slightly up. During the 2000′s gold was up sharply, stocks were volatile and bonds were pretty flat.
Inflation Adjusted Gold, Stocks, Bonds
So what does that give us? Each decade had it’s star performer, a lackluster performer and a loser. And it was always a different actor. So a balanced portfolio of all three would lessen volatility and provide a greater total return. If we had a Crystal ball and could tell which one of the three would be the star our portfolio could really shine.
In the article Ben Graham’s Curse on Gold Casey Research editor David Galland shows us why legendary investor Warren Buffet’s mentor Ben Graham basically ignored gold. Ben Graham is known as the “father of value investing” and modern portfolio theory is based on his work.
Graham recommended switching between stocks and bonds when one or the other became over or under valued. But what happens if both stocks and bonds stagnated or fell together?
See Ben Graham’s Curse on Gold for the answer.
See Also:
What Happens to Gold if We Enter a Recession or Depression?
Inflation Adjusted Gold Price Chart
Inflation Adjusted Stock Prices
Why (and How) China is Boosting the Price of Gold
How Global Financial Developments are Affecting the Price of Gold
What is the Definition of “Spot Gold“?
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About Tim McMahon
My grandfather lived through the Hyperinflation in Weimar, Germany--to say he was an original “gold bug” would be an understatement. I began reading his “hard money” newsletters at the age of 16 and the dividends from gold stocks helped put me through college. I began publishing the Financial Trend Forecaster paper newsletter in 1995 upon the death of James Moore editor of Your Window into the Future and the creator of the Moore Inflation Predictor©. FTF specializes in trends in the stock market, gold, inflation and bonds. In January of 2003, I began publishing InflationData.com to specialize in all forms of information about the nature of Inflation. In 2009, we added Elliott Wave University to help teach you the principles of Elliott Wave analysis. In January 2013, we began publishing OptioMoney. Connect with Tim on Google+.
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Anahin (www.anahin.net) gives a complete Graham analysis for all 4000 stocks listed on the NYSE.
(Ben Graham was the mentor of Warren Buffett and the pioneer of value investing)