Check out this graphic I put together using the information I found on USAGold.com:
During the first decade of the 21st Century, the price of gold has seen an average annual increase of 14.41% compared to the S&P 500 Index’s Total Return of -.95%. For those who are interested, I put together a History of Gold Prices 2000 – 2009.
This is not to be taken as a promotional for investing in gold. I think gold can drop in value just as much as any other asset. And, since I see 3 or 4 gold commercials every 30 minutes on the news networks, it makes me think a bubble may be forming. Who knows. I sure don’t.
In his book, The Little Book of Bull Moves* (highly recommended), Peter Schiff recommends using gold as gauge for inflation:
“The concept of inflation remains fairly elusive: Since the real rate can’t be quantified, we have to compare changes in nominal prices to price changes in a commodity, such as gold, which is a better store of value and therfore a more objective standard by which to measure prices. Ratios representing these price relationships have historically guided us in judging how much inflation is reflected in nominal prices.”
He even mentions that he thinks inflation has run closer to 8 – 10 percent per year rather than the 4 percent the government has been publishing via the CPI. Interesting…