Tuesday, January 11, 2011

Gold's run not yet finished

From Mineweb.com:

Despite glimmers of hope for the US economy in particular, the global economy is likely to face further problems and gold prices will go higher.

Author: David Levenstein
Posted: Monday , 10 Jan 2011


Once again gold has proved to be an effective preserver of wealth as well as an outstanding performing asset class. Since 2000, when the bull market in gold began, the price has moved from $250 an ounce to over $1400 an ounce. In 2010 gold was up 30% in US$, 35% in Sterling, 22% in Canadian dollars, 17% in Swiss Francs, 13% in Japanese Yen, 30% in Russian Rubbles, 25% in Chinese Yuan, 16% in South African Rand and $38% in Euro. And the average annual gain for gold in US dollars has been more than 20%, consistently for 10 years.

What amazes me is that there are still investors out there who continue to denigrate gold as an investment simply because it does not pay a dividend. Yet, even a person who has the most rudimentary understanding of mathematics and who can manage to add a few prime numbers together can surely comprehend the following:

If you invested $100,000 in gold in 2000, the value of that gold is now worth around $560,000. If on the other hand you invested the same amount into bonds yielding say 8% per annum, on a compounded basis, the value of that investment is now worth around $216,000. (Yes, you may have gotten higher yields from some broken country but these higher yields come with a risk of a default. Recently, interest rates soared in the Eurozone; Greece 12.5%, Ireland went above 9%). Anyhow, back to the calculation...which is the greater of these two numbers?.....read on

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