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Gold’s 2010 Performance

By JLP | February 11, 2011

Gold’s ride in 2010:

The price of gold closed at $1,087.50 on December 30, 2009. It closed at $1,405.50 on December 31, 2010. That’s a 29.2% increase for 2010. Wow! Compare that to the S&P 500′s total return of 15.06% and you have double wow!

I spent a little time putting together a couple of graphics showing gold’s ride since 2000 and also compared it to the S&P 500 Index.

I wanted to do a comparison of the monthly performance of gold vs. the S&P 500. I only have monthly returns for the S&P so I had to make a couple of adjustments in order to get a side-by-side comparison. So, for this graphic, I assumed a base value (beginning value) of 100 and then computed monthly values for both from 2000 – 2010. This is what I came up with:

What’s interesting is that through all 132 months, the S&P 500 had only four more months with the negative returns than gold. But, gold had seven months with returns over 10% while the S&P 500 had none.

Looking at all this brings to mind a few questions:

1. Is gold in a bubble?

2. How high can gold go?

Unfortunately, I don’t know enough to speculate on either one.

Source: My source for daily gold price numbers was USA Gold

Topics: Gold, Investing, S&P 500 Index | 12 Comments »


12 Responses to “Gold’s 2010 Performance”

  1. BG Says:
    February 11th, 2011 at 12:45 pm

    Graphs like that last one are highly influenced by your starting points. Dec ’99 was the _peak_ for the S&P 500 during the dot-com bubble, where-as Gold was at it’s minimum.

    Not to say that gold hasn’t been on a tear for the last decade, but the starting points you chose greatly influence the numbers.

    My opinion: gold has been on a 10-year bull run and is at its all-time (non-inflation adjusted) high. If you wanted to buy gold, you should’ve done it years ago. Personally I don’t want to start buying gold today (while it is at its highest) — it would be like buying the S&P 500 back in Dec ’99 (when the S&P was at it’s peak).

  2. JLP Says:
    February 11th, 2011 at 12:51 pm

    True, BG. I’ll look at rolling periods.

  3. Jon Says:
    February 11th, 2011 at 2:08 pm

    Probably depends on what inflation turns out to be. But, yes, I think it’s a bubble too.

  4. BG Says:
    February 11th, 2011 at 2:08 pm

    JP) The way I like to graph a comparison of these two (gold and S&p 500) so that it isn’t affected by the starting period, is to graph the S&P500 in ‘gold oz’.

    Basically, for each month you take the value of the S&P500, and divide it by the price in Gold/oz. The number you get shows the relative value of the two. Back in ’99, it would take 10 or so gold coins to buy the S&P 500, today it takes you less than one coin…

  5. JLP Says:
    February 11th, 2011 at 2:22 pm

    BG, Unfortunately, I don’t have the “values” for the S&P 500 Total Return Index. All I have are the monthly returns. So, I have to establish some sort of beginning value if I want to compare the index with other asset classes.

    There was no attempt on my part to try to make gold look good.

  6. Leland Says:
    February 11th, 2011 at 2:28 pm

    Can we superimpose a graph showing when Glen Beck started hustling for Gold Line?

  7. JLP Says:
    February 11th, 2011 at 2:35 pm

    Leland,

    Sure, I’ll get right on that…lol.

  8. Beeg Says:
    February 11th, 2011 at 2:39 pm

    My advice, buy gold.

    Avoid letting men (central banks) determine how you store value. I would get in now. With the trillion + dollar deficits, high unemployment, over double money supply (since 2008), what value do you think the dollar is going to have. This doesn’t include the coming default on medicare & soc sec.

    If you believe in Congress, keep dollars. If you don’t believe in Congress, buy gold.

  9. Rick Francis Says:
    February 11th, 2011 at 2:59 pm

    Seems like a good time to short gold…

    Beeg,

    You aren’t limited between dollars and gold. Any commodity is an inflation hedge, why not choose a commodity that doesn’t look like it’s at the peak of a bubble?
    Real Estate is another inflation hedge, with all of the fore closures it seems like there should be great deals to be had. If you don’t have a huge sum or don’t want to be a landlord you could use a REITs as an alternative.
    Stocks are also an inflation hedge as companies will raise their prices in response to inflation and they own real assets- land, factories, inventory etc. which will go up in value with inflation.
    If you really think the government is going to collapse wouldn’t food be a much better thing to hoard? I’m not so pessimistic myself, but I really don’t want to hold any long term bonds…

    -Rick

  10. BG Says:
    February 11th, 2011 at 4:47 pm

    “Can we superimpose a graph showing when Glen Beck started hustling for Gold Line?”

    LOL — and when Jim Cramer told everyone to have their portfolio 20% in gold!

    ;)

  11. BG Says:
    February 12th, 2011 at 10:53 am

    JLP) “BG, Unfortunately, I don’t have the “values” for the S&P 500 Total Return Index.”

    You can go to finance.yahoo.com, use stock quote “VFINX” (vanguard 500 index investor), click on “Historical Prices”, then download the spreadsheet (daily,weekly,monthly back to 1987). The column you’d want is the “Adj Close” column which adjusts the price based on the dividend payout.

    Is that the data you were looking for?

  12. Travis Says:
    February 14th, 2011 at 8:47 am

    My professors said it best.

    “Buy gold when times have been good. Sell gold when times have been bad.”

    I’d definitely take your profits and maybe let the initial investment ride.

Comments