A Golden Decade for the “Barbarous Relic”
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December 27th, 2009 by Prieur du Plessis, Investment Postcards from Cape Town
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While gold bullion is correcting from all-time record levels in early December, US Global Investors shows the yellow metal is on track to close the decade that ends next Thursday as the top performer among the principal asset classes, thanks to an annualized return of 14.3%. Commodities (as measured by the S&P GSCI Enhanced Total Return Index) gained 13.6% per year over the period that started on January 3, 2000.
According to US Global Investors, the decade looks set to be the worst in recorded history for the US stock market - “worse than all of the many boom-and-bust cycles of the 19th century, worse than the Great Depression-era 1930s, worse than the recession-plagued 1970s. The S&P 500 Index opened the decade at 1,469.25 beginning of 2000. When the market closed on Christmas Eve, the S&P 500 stood at 1,125.46 - with four trading days left in the decade, the index’s annual performance over that span is negative at 2.6%. The Dow Jones Industrial Index has lost about 1% per year over the same period, and the Nasdaq Composite Index is down a whopping 5.9% annually. When adjusted for inflation, the ten-year returns for these indices are even lower.” However, gold stocks (as measured by the XAU Index) have had an excellent decade, climbing 9.4% annually.
A picture paints a thousand words …
Meanwhile, in the chart below, Egon von Greyerz of Matternhorn shows (via US Global Investors) just how small the precious metals market is in relation to large companies like Microsoft and Exxon. Global privately held bullion is only about three times the size of Microsoft’s value, a miniscule figure for global ownership. In total, privately held physical investment in gold makes up only 0.7% of total investable financial assets. Mr. Greyerz argues that currently the average fund manager and investor has no exposure to gold on a relative basis, but says that an increase in the allocation to gold would be supportive of the gold price in the future.
Source: US Global Investors - Weekly Investor Alert, December 24, 2009.
Time will tell what the next decade will bring for gold, but my money remains on the “barbarous relic” scaling fresh peaks in due course.
Dr. Prieur du Plessis is an investment professional with 26 years' experience in investment research and portfolio management. More than 1,200 of his articles on investment-related topics have been published in various regular newspaper, journal and Internet columns, including his blog, Investment Postcards from Cape Town. He has also published a book, Financial Basics: Investment. Prieur is Chairman and principal shareholder of South African-based Plexus Asset Management, which he founded in 1995. The group conducts investment management, investment consulting, private equity and real estate activities in South Africa and a number of foreign countries. He also serves as Honorary Consul of Slovenia for South Africa, actively developing economic, cultural and scientific relations between Slovenia and South Africa. Prieur is 54 years old and live with his wife, television producer and presenter Isabel Verwey, and two children in Cape Town, South Africa. His leisure activities include long-distance running, traveling, reading, motor-cycling and scripophily. Read more from the author/contributor here.
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Tags: Barbarous Relic, Boom And Bust, Bust Cycles, Christmas Eve, Commodities, Dow Jones Industrial, Dow Jones Industrial Index, Financial Assets, Gold, Gold Bullion, Gold Price, gold stocks, Golden Decade, Gsci, Matternhorn, Nasdaq Composite Index, Precious Metals Market, Principal Asset, Relative Basis, Us Global Investors, Us Stock Market, Xau IndexPosted in Markets |
