Lets do some more comparisons. Let say your ancestors invested in gold back in 1834 when gold was only worth $20.69 an ounce (177 years ago), what would you return be during those 177 years? 2.50% approximately.
Check the Math Yourself: 1.02498^177 * 20.69 = 1630.74 increase (Subtracting initial $20.69 cost)
So what is the take home message? Gold is very unpredictable, virtually entirely based off speculation that started mainly in the 1970s, and can stretch appreciation or depreciation across a decade or longer.
Gold has had an 11 year span with 1604% return, so maybe this current +433% return span has a little more kick in it after-all by comparison.
Maybe it’s not a bad investment because of these historical comparisons – let’s say gold has a 50/50 chance of getting another 400% return in the next 10 years or getting a –39% return in the next 10 years – wouldn’t you call that a decent investment? Just make sure not to invest too much in gold, diversification is key. If you did believed in those %’s and odds though and invested $1000 — the assess value of that investment would be ((50% * 1000 * 400%) + (50% * 1000 * 61%) = $2,305 (which would be an amazing assessed value and return on investment). Remember that physical gold is taxed at unfavorable rates though (As a collectible @ 28%)
There are a lot of arguments that could be made against those odds, that’s the fun part of risk/return – speculation. Maybe you think the odds are 80/20 or 10/90 – the only thing you can be certain of is anyone who says they know for certain is a liar or a criminal.
Does this mean there isn’t a bubble? Absolutely not, but gold might have substantially more room to inflate before adjusting/popping.
Disclaimer: Always consult a financial professional for investment advice. All investments carry risk, be sure to properly assess your risks before investment.