Saturday, September 26, 2009

Investing in Gold

Investing in gold usually means long term investing for five to ten years or more. The chart below shows Gold priced in US Dollars from 1973 to the present.

One ounce of gold purchased in 1973 for $64 is now worth more than $900. This represents a “return on investment” greater than 1000%.

By studying the markets some may be able to make good timing decisions. Charts such as DOW/Gold can aid in spotting trends and more importantly major trend changes. The Dow Jones Industrial Average, the DOW, is computed based on the stock prices of 30 of the largest and most widely held public companies in the United States. The value of the DOW in 1973 was about $1000 and dividing that by $64 is 16. The ratio made a high of 44.70 in 1998 and has declined since to about 10.

The chart shows that since 2000 gold has in general been a better investment than stocks.

A summary of gold price performance is shown below.