This is amazing given that it’s literally just an inert metal vs the 500 biggest American Corporations.
(Comparing GLD vs SPY starting around 2005.)
https://www.portfoliovisualizer.com/backtest-portfolio?s=y&t...
Though looking at the low correlation between gold and the rest of the market, it looks like you did make an argument there for gold as part of a diversified portfolio.
https://www.reuters.com/article/us-gold-swiss-fakes-exclusiv...
https://www.celticgold.eu/en/gold-university/fake-gold-bars....
Comparing one-off investments is very dependent on the start date, and dollar-cost averaging more accurately models what people can actually do and which returns one may be able to expect. Who has a large lump sum laying around to invest rather than investing a portion of one's income every month/quarter?
2008 was a sea change in fiscal policy that unleashed worldwide money printing. It isn’t surprising that gold has done very well during this period. And I don’t see that trend changing anytime soon.
But in the long-term, I agree with you. Which is why precious metals are a small part of my portfolio.
I guess it depends on your definition of amazing.
If you assume -- and I'm not saying this is true -- that the value of "the world's best companies" trends at 8%/year with a +/-15% "variance", while the value of "a pile of rocks" trends at 0%/year with a +/-15% "variance", you would totally expect to see long periods where they yield comparable returns.
Personally, I don't find that particularly amazing, but to each their own!
* https://fred.stlouisfed.org/series/GOLDAMGBD228NLBM
If you bought gold in 2005, you would have peaked in 2011, and not recovered until mid-2020. If you have the nerve/patience to do that, you have a stronger stomach than I.
I am constantly reminded of Buffett's 2011 take:
> Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?
> Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A.
> Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices.
> A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.
* https://www.berkshirehathaway.com/letters/2011ltr.pdf
Gold has not been a very useful 'investment' over the long-term:
* https://www.pwlcapital.com/will-gold-save-the-day/
What are the expected returns of gold given that it has no earnings?
A small amount of gold might get lost or stolen and it's usually more annoying to sell than stocks. But otherwise, you can just keep it in a sock under your pillow and be reasonably sure it's still there in a few decades.
In what area of the world do you live in that these scenarios are actually keeping you up at night?
This is not even to mention the prospect of “constructive” land reform, e.g. squeezing landowners (or certain disfavored types of landowners) with policy and then increasing property or income taxes to the point where they have no choice but to sell at a loss.
> In what area of the world do you live in that these scenarios are actually keeping you up at night?
Canada is on that list. I live in Canada. This is not something anyone I know is losing sleep over.
They may be buying gold for other reasons, but it is not for the possibility of losing their land.
This HN thread is about Ray Dalio and bonds, and the sub-thread is about the S&P 500 versus gold returns, and gold returns in general. Bringing in farmland is quite the curve ball.
I'm not invested in gold, and I mostly agree with Buffett here. I just want to point out that the argument ain't watertight.
(I try to be especially critical of arguments that support positions I agree with. Have to be careful not to bullshit yourself too much.)
I mostly agree with the conclusions of the Dalio piece, too. But I don't agree with all the arguments.
My main takeaway was to get inspired to look into how to short US bonds.
TL;DR; gold didn't beat the S&P 500 over the past 15 years.