# Gold loves the Bank of Canada



## james4beach (Nov 15, 2012)

To be fair, the market price of gold (in USD) is probably minimally affected by the Bank of Canada's policies (though I could imagine a mild bullish effect on world gold). But certainly a declining CAD boosts the return that gold exhibits in CAD terms, which is what's most important to us.

I was looking at some performance figures and gold is actually doing much better than I thought earlier. I'm looking at both IGT.TO as a proxy, and $GOLD:$CDW on stockcharts as this charts gold-in-CAD

Total return of gold in CAD:
1 year: +17%
2 years: -5%
3 years: -6%
4 years: +18%
5 years: +34%
6 years: +45%
7 years: +73%
8 years: +110%
9 years: +145%
10 years: +200%

There are only two negative returns in there. Now here's where it gets interesting. TSX total return in 10 years is +100% and *gold has double the return at +200%*

To think that the passive brick of metal sitting in my safe deposit box has out-performed the grand old banks, railroads, and other titans of the stock market! And if the Bank of Canada is thoroughly committed to weakening our currency further, I can only imagine that gold will continue to outperform stocks.

_Disclosure: my own account, and my family accounts, hold significant CEF.A so I'm talking my book_


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## james4beach (Nov 15, 2012)

Let me also point out that gold is out-performing those dividend stocks that everyone is so crazy about on these forums.

(Over 10 years, that is) ... _double_ the TSX performance.


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## swoop_ds (Mar 2, 2010)

Yes I was quite happy to see it at $1600cad total an oz. what are your thoughts on silver these days James?


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## GOB (Feb 15, 2011)

Apple: 2,138%
Telus: 229%
Chevron: 181% (after a 50%+ haircut in crude)
Bell: 211%
Lockheed-Martin: 378%
JNJ: 125%
Boeing: 219%
JP Morgan: 97%
Kinder Morgan: 321%

A portfolio like this has far outperformed gold while being far less risky - huge companies across a variety of industries instead of a single volatile commodity. No safety deposit box fees, either. 

I used mostly american stocks because I couldn't find a calculator that did TSX stocks but the point is similar. Nothing stopping us from investing in USA. Those beloved Canadian bank stocks probably have around 200% total returns over the past decade. 

Gold is a part of my portfolio but that's all it ever will be.


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## 1980z28 (Mar 4, 2010)

Yes


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## 299889 (Jan 5, 2015)

Where do go to check to the Canadian price of gold?


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## gibor365 (Apr 1, 2011)

RY:NYSE 251% (and 10 years ago FX rate practically = today's rate)
MO 533%
ABT 163%
RCI 270%


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## Eclectic12 (Oct 20, 2010)

GOB said:


> ... I used mostly american stocks because I couldn't find a calculator that did TSX stocks but the point is similar...


If Yahoo's "Adjusted Close" truly does take splits and dividends into account and I'm understanding correctly, I get:

AGU +600%
TD +289%
BNS +227
STN +500%

For the more conservative:
EMA +317%
FTS +307%
TRP +260%
ENB +521%
MRU +443%


I've owned a few for close to that long so I should be able to spot check Yahoo's accuracy when I get a chance.


Cheers


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## GOB (Feb 15, 2011)

Eclectic12 said:


> If Yahoo's "Adjusted Close" truly does take splits and dividends into account and I'm understanding correctly, I get:
> 
> AGU +600%
> TD +289%
> ...


Thanks. Point is buying blue chip dividend stocks and reinvesting the proceeds has been a far better and safer investment than holding gold. The function of gold historically has really been to preserve wealth, not increaee it.


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## HaroldCrump (Jun 10, 2009)

eeehitscody said:


> Where do go to check to the Canadian price of gold?


Go to *this link *(on kitco.com), then select _Gold in Canadian Dollars_ under _Related Charts_

However, if you are planning to buy/sell, then this price is not what you will get.
For that, check with a reputable dealer such as Scotiabank, Royal Bank, Border Gold, and a couple of others.


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## Eclectic12 (Oct 20, 2010)

I forgot I had a couple of reports handy to me ... Yahoo is looking pretty accurate.

To compare I took my Dec 2004 statement and compared with Dec 2014.
I'm short of time tonight so I ignored dividends. 

ENB +400.

For the following, I started a DRIP part way through so my number is closer to Yahoo's number:

TD +245%
TRP +250%
BCE +260%


*james4beach*:

The TSX total return source looks suspect to me if it's 100% (or maybe the dates chosen?).

The first question is why my XIC in this period (ignoring dividends) says +124%.
Out of curiosity, I went back to Yahoo for XIC which says +211%.

Or if you prefer the broader XIU, Yahoo says +212%.


Definitely a puzzle .... but it appears the gap is smaller than it seems, if not almost negligible.


Cheers


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## james4beach (Nov 15, 2012)

swoop_ds said:


> Yes I was quite happy to see it at $1600cad total an oz. what are your thoughts on silver these days James?


My sense is that within the gold & silver pair, silver is the one that responds most to economic expansion or high inflation. Since we don't have either, silver has been under-performing


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## james4beach (Nov 15, 2012)

eeehitscody said:


> Where do go to check to the Canadian price of gold?


I just take the US prices you'll find anywhere and convert it to CAD. That's the same thing any broker does.


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## james4beach (Nov 15, 2012)

Eclectic12 said:


> The TSX total return source looks suspect to me if it's 100% (or maybe the dates chosen?).
> 
> The first question is why my XIC in this period (ignoring dividends) says +124%.
> Out of curiosity, I went back to Yahoo for XIC which says +211%.
> ...


Hmm well it's important we find the right number for this!

I'd say the most reliable source should be ishares.com. If you pull up XIC's page, go to Returns and click Cumulative, it shows as of Dec 31, 2014
10 year return: 108.45

So there's one data point for +108% total return. (Remember that return in ratio format, such as 2.08, actually means 108% .. not 208%)

To verify that number I used stockcharts.com where I have a subscription, so I can pull up long-term charts. This one is 10 years to date, instead of Dec 31. When I plug in XIU, which includes dividends paid out, I see performance +110% ... very close to iShare's XIC.

In the same stockcharts box, if I plug in $GOLD:$CDW, I get +199% -- double the performance.

So those are two data points that both tell me the 10 year performance of the TSX is around the +100% mark.

Where exactly do you see the higher number on Yahoo? Their performance page only shows up to 5 years, not 10 years.


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## james4beach (Nov 15, 2012)

Third source. Globe and Mail's page for TSX Total Return
http://www.theglobeandmail.com/globe-investor/markets/indexes/chart/?q=tsxt-I

Click 10 year and divide ending value by starting value. Result to date = 2.12 = 112%
Gold has gone from $530 to $1600 CAD. Result to date = 3.04 = 204%

I think that's pretty conclusive. Gold outperforms TSX ... doubles it. And I hate to break this to everyone but that also means it outperforms all the "blue chips" on average, that's what the benchmark is.


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## fatcat (Nov 11, 2009)

james4beach said:


> Third source. Globe and Mail's page for TSX Total Return
> http://www.theglobeandmail.com/globe-investor/markets/indexes/chart/?q=tsxt-I
> 
> Click 10 year and divide ending value by starting value. Result to date = 2.12 = 112%
> ...


wrong ... disney is up 234%, sbux 190% and these are *not including dividends* ... amazon is up 567% ... netflix is up 3512%

all kinds of blue chips just cream gold over the last 10-years

gold doesn't pay diddly ... most of the standout blue chips pay dividends, even if small

plus prior to the last 10 years, gold hasn't done anything

average price of gold in 1980 = $615
average price of gold in 2006 = $603

and no dividends


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## james4beach (Nov 15, 2012)

OK fatcat, so feel free to go ahead and construct a "blue chip" index for us that only has the well-performing ones ... not the crummy ones ... and continues to only contain the well-performing ones over multiple decades.

Holding just the well-performing ones is a fantasy; easy to say in hind-sight but virtually impossible to actually pull off.

As for gold, I agree it did not perform well in the previous decade.


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## larry81 (Nov 22, 2010)

amazon and netflix are not bluechip imho !


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## fatcat (Nov 11, 2009)

james4beach said:


> OK fatcat, so feel free to go ahead and construct a "blue chip" index for us that only has the well-performing ones ... not the crummy ones ... and continues to only contain the well-performing ones over multiple decades.
> 
> Holding just the well-performing ones is a fantasy; easy to say in hind-sight but virtually impossible to actually pull off.
> 
> As for gold, I agree it did not perform well in the previous decade.


but i don't buy indexes why would i compare to gold to something i don't buy ?

all we are doing here is looking at past returns, easy, so i am simply saying there are plenty of stocks with better returns

you have to pick em of course ... but you also have to pick the years that gold will perform well and not flatline for decades

anyway, peace, i get your point, it has done well

now we are looking forward and have no past returns, where do we place our bets ? 
i say johnson and johnson and apple and exxon and the like over gold but thats just me


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## james4beach (Nov 15, 2012)

Sure, all of this involves picking to some degree. There is a useful aspect of gold/precious metals as an asset class, though. It has a looser correlation with the broad stock index.

That diversification, more than anything else, is why I pushed for gold inclusion in our family account. With regular stocks you can pick and choose all you want, but they're all going to have very high correlation with each other.


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## hboy43 (May 10, 2009)

james4beach said:


> Let me also point out that gold is out-performing those dividend stocks that everyone is so crazy about on these forums.
> 
> (Over 10 years, that is) ... _double_ the TSX performance.


What is your percentage holding of gold in your entire portfolio? What return has your entire portfolio gotten you over that 10 year period? Is it fair of you to compare a single entity to a more diversified idea "those dividend stocks that everyone is so crazy about on these forums"?

I hold neither gold nor FI. As reported elsewhere, I am quite happy with my long term total portfolio return, though lower than your 10 year gold numbers. It might even be higher than your total portfolio performance.

So what is your 10+ year total portfolio performance? Surely that is the only number that really matters in the end, the long term average total portfolio return? My numbers are on this board for all to see. I even fessed up to having a shitty year in 2014. I look forward to your report.

hboy43


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## james4beach (Nov 15, 2012)

My portfolio is 6% gold. That's double the stock allocation of 3%.

Gold is considered an asset class on its own, at least in my mind. Stocks are another asset class. So to compare these asset classes you compare gold vs a benchmark stock index, which is exactly what I've done.

My performance is not high, and it's not meant to be. I achieve fixed income returns and they crawl along at whatever the prevailing bond and GIC rates are.


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## humble_pie (Jun 7, 2009)

but you happened to cherry pick one of the best decades for gold since bretton woods collapsed in 1972, though.

how would the previous decade, from 1995-2005, look for gold? not so good?

what about 43 years, from 1972-2015? are there even stats showing the TSX with all stock distributions & dividends compounded, nothing ever paid out, since 1972?

personally i think when we are talking 1972 as a base date, there are some private houses in canada that might come out tops in value appreciation today.

one wants to keep in mind that those houses have paid out gigantic bonuses every day of every year since bretton woods. While gold sulked alone in its dark bank vault & stingily paid out nothing, the homes were lived in & loved. By generations of children, teens, parents, grandparents, girl friends, gardeners, lovers, aunts, uncles, dogs, cats, parrots & other pets. Show us a gold bar that can tell such tales.


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> Hmm well it's important we find the right number for this!
> 
> I'd say the most reliable source should be ishares.com. If you pull up XIC's page, go to Returns and click Cumulative, it shows as of Dec 31, 2014
> 10 year return: 108.45
> ...


Somehow in copying the formula in excel to easy comparing the numbers - I managed to miss that the "-1" had been dropped in the formula being duplicated ... that's what I get for being in a rush! :biggrin:

That said - this adds more verification for Yahoo's "Adjusted Close" number as after fixing the formula, the results become 112% and 111%.




james4beach said:


> Where exactly do you see the higher number on Yahoo?
> Their performance page only shows up to 5 years, not 10 years.


Performance page? ... perhaps you mean the java chart widget on the right of the quote page?

I ask because the far right hyperlink to change the chart is labelled "max" instead of "5 years".
Clicking on it for XIC shows a fourteen year chart with a "week of Feb 26th, 2001" as the starting data point. 

I'm not a big fan of the charts are there's too much that can be hidden depending on the time period selected. Instead, I use the "Historical Prices" link to see lots of data with the goal of understand what's happening. Just clicking on this link seems to default the start data to XIC's first trade date Feb 22nd, 2001 (iShares lists inception as Feb 16th, 2001) through the current date. 

One of the data columns provided is "Adjusted Close", which says "Close price adjusted for dividends and splits".
So I picked a 10 year period, grabbed the start point price of 10 years ago plus today's price to end up with total growth - which with a wrong formula, gives a wrong result ... with a correct formula, it's a fourth source saying pretty much the same thing, IMO.




james4beach said:


> ... I think that's pretty conclusive. Gold outperforms TSX ... doubles it. And I hate to break this to everyone but that also means it outperforms all the "blue chips" on average, that's what the benchmark is.


Historically ... sure ... but is past performance going to result in similar performance going forward?


Cheers

*PS*

The "Historical Prices" section also provides the option to filter by "Daily", "Weekly", "Monthly" & "Dividends Only".
Once the data set is to one's liking - the "Download to spreadsheet" hyperlink allows one to slice/dice the data in a spreadsheet offline.


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## swoop_ds (Mar 2, 2010)

This is sounding like a case of dragon sickness. James, are you sure a dragon didn't sit on your gold for a few hundred years before you bought it? (see the new hobbit movie if this reference makes no sense to you)


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## swoop_ds (Mar 2, 2010)

I don't know if this is totally part of this conversation or not, but I remember Kevin O'Leary talking about gold and he says that he keeps it at 5%, rebalancing if it goes up or down like any other asset class. He didn't say how often he does this but I 'think' I remember hearing that he keeps physical gold. I believe he said it keeps him warm at night. So Humble, it does give back SOMETHING.


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## techcrium (Mar 8, 2013)

james4beach said:


> My portfolio is 6% gold. That's double the stock allocation of 3%.
> 
> Gold is considered an asset class on its own, at least in my mind. Stocks are another asset class. So to compare these asset classes you compare gold vs a benchmark stock index, which is exactly what I've done.
> 
> My performance is not high, and it's not meant to be. I achieve fixed income returns and they crawl along at whatever the prevailing bond and GIC rates are.


OP if you are so pro gold, why is it only 6% of your total portfolio? Why are most of your assets in "funny money" or "paper money"?


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## HaroldCrump (Jun 10, 2009)

techcrium said:


> OP if you are so pro gold, why is it only 6% of your total portfolio?


6% is a pretty big allocation to a single asset (gold), not even an asset class (precious metals).


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## zylon (Oct 27, 2010)

Since becoming a Disciple of Mawer, I must do my part in spreading their Gospel as regards Gold.

Mawer presented an excellent article about gold in 2009, which is still relevant today.
This chart is from that article:










The last bit sums it up nicely:










The whole thing is here:
http://www.mawer.com/assets/Knowled...ec-31-2009-Gold-Just-a-Shiny-Yellow-Metal.pdf

All that taken into consideration, I have no trouble admitting to an attraction for shiny stuff of questionable/unknown value.


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## swoop_ds (Mar 2, 2010)

I've posted this before, but...
https://www.youtube.com/watch?v=l_3_9zK4y-Q

P.S. it's only 20 seconds


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## fatcat (Nov 11, 2009)

james4beach said:


> My portfolio is 6% gold. That's double the stock allocation of 3%.
> 
> Gold is considered an asset class on its own, at least in my mind. Stocks are another asset class. So to compare these asset classes you compare gold vs a benchmark stock index, which is exactly what I've done.
> 
> My performance is not high, and it's not meant to be. I achieve fixed income returns and they crawl along at whatever the prevailing bond and GIC rates are.


james, you are my favorite resident perma-bear ... but for the life of me i cannot fathom how you, in your thirties, have allocated only 3% of your wealth to equities

you have 35-40 working years ahead of you and you have only 3% in stocks

you seem to insist on looking at stocks as a class, as though all stocks are equal and only the index matters

the companies that we own stock in deliver all the goods and services we human need to live .. but you don't want to own them

i just don't get it :cower:

ps. it seems like you tend to view stocks in terms of their valuation and i tend to view them in terms of the goods and services that they signify

the valuations will change, even radically but the underlying need for the products / services will not
the solution is simple, it's all about cash management
having enough to ride out the crash

james, you are getting poorer and poorer every single day


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## james4beach (Nov 15, 2012)

I'm a bear, but I have my reasons for it: I think the economy fundamentally peaked in 2000 and we've been riding on fumes ever since.

That aside, there's a bit of hypocrisy around our forum. People unanimously love dividend stocks based on the trailing 5 and 10 year performance, and this apparently is the basis for gambling your entire retirement on those wonderful "dividend stocks". Yet I show you that gold has great performance -- beating the TSX -- in the last 10 years, and people brush it off as cherry picking.

A bit hypocritcal don't you think?


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## HaroldCrump (Jun 10, 2009)

One issue with many of these gold vs. stock index charts is that they are denominated in USD$.
The most commonly used price quotes for Gold are in USD.
Whenever we say "gold is up", or "gold is down", we are implicitly referring to its USD price.

However, for a Russian or a Greek or an Italian, that price does not matter.
What matters is the price of gold in their local currency.

Now, local currencies get devalued & re-valued all the time.
There is a lot of _survivor bias_ in currencies.
The old Lire or Drakhma were dying...therefore, they got merged into the Euro.
The Russian Ruble has been re-valued several times since 1917, and it seems another round of re-valuation may be coming up.

To compare gold with equities, we need to establish a more solid valuation mechanism, not just the USD price.
As Canadians, we should look at the price of gold in CAD$ terms since 1970, or whatever.

What is the value of gold in terms of the Greek Drakhma, or the Italian Lire, or the Russian Ruble?
I am sure those returns are astronomical, far above the return of those respective stock markets - dividends or no dividends.

I am not a gold bug, and I am not advocating for gold - just pointing out that the basis of measurements can be misleading.

For reference, here is a gold chart in CAD$ since 1975


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## humble_pie (Jun 7, 2009)

gosh the forum isn't unanimous on dividends & i can't recall seeing any retirement portf on here that was ever 100% built on "wonderful" dividend stocks ...

but some have indeed mentioned that plucking out just the past decade in gold is cherry picking

james4 did you happen to notice zylon's chart?

hypocrits/_*not*_


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> ... That aside, there's a bit of hypocrisy around our forum.
> 
> People unanimously love dividend stocks based on the trailing 5 and 10 year performance, and this apparently is the basis for gambling your entire retirement on those wonderful "dividend stocks". Yet I show you that gold has great performance -- beating the TSX -- in the last 10 years, and people brush it off as cherry picking...


I'd have called the threads I read as debates with little agreement ... I also recall discussion of cherry picking in there as well, so I'm not sure why it's hypocritical.


IAC ... at the end of the day, the key is what's going to drive what happens going forward.


Cheers


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## Charlie (May 20, 2011)

Interesting numbers JAG. It's nice to see data back up our perceptions.

Per Harold's chart....gold was certainly the place to be from 2005 to 2012. Not so much for any other period over the last 30 yrs.


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## HaroldCrump (Jun 10, 2009)

It did well between 1975 & 1990 as well.
Only the period from 1990 to about 2005 is sideways for gold (in CAD$).

That period happens to be one of the major growth spurts in North America.
We had NAFTA, manufacturing surge, technology/dotcom, low inflation, etc.
This was the period Canada balanced its books, and the CAD$ appreciated across other major currencies.


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## fatcat (Nov 11, 2009)

james4beach said:


> I'm a bear, but I have my reasons for it: I think the economy fundamentally peaked in 2000 and we've been riding on fumes ever since.
> 
> That aside, there's a bit of hypocrisy around our forum. People unanimously love dividend stocks based on the trailing 5 and 10 year performance, and this apparently is the basis for gambling your entire retirement on those wonderful "dividend stocks". Yet I show you that gold has great performance -- beating the TSX -- in the last 10 years, and people brush it off as cherry picking.
> 
> A bit hypocritcal don't you think?


there just is no way i think owning johnson and johnson or canadian national railway is "gambling" in any real definition

in what scenario are people not going to need railroads to move products or medical devices to treat illness ?

the mistake you make is by gambling (and that is exactly what you are doing) entirely on your supposition that equity valuations are false, they may be, but they also may _not_ be

you are completely unprepared for the likely outcome, namely that _some_ are overvalued but many are not

if you insist on remaing a perma-bear then please, at the very least, start putting out a newsletter that paints a vivid picture of the coming apocalypse so you'll have more money to put into gic's

i expect a complimentary subscription for proffering the idea


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## james4beach (Nov 15, 2012)

humble_pie said:


> gosh the forum isn't unanimous on dividends & i can't recall seeing any retirement portf on here that was ever 100% built on "wonderful" dividend stocks ...


I would still say that there is a pervasive, pro-dividend stock bias in these forums. And I think it's a function of recent strong performance from these.



> but some have indeed mentioned that plucking out just the past decade in gold is cherry picking


I agree it's cherry picking, but at least 10 years is a pretty frequently used performance metric.



> james4 did you happen to notice zylon's chart?


I did. I will point out that if you zoom into that chart, as shown here for instance, you will find many periods in which stocks exhibited poor real performance. Many of these periods span 10 years and even 20 years and historically speaking this is not rare. It's easy to find 10 year periods with horrible returns in stocks. Even 20 year periods of poor stock performance exist. There's even a 45 year period on that chart, where stocks had zero real return.

The reality is that no individual stays invested in stocks for 50 or 100 years. *Everyone is timing the markets to some degree*; stock investing is extremely sensitive to when you start and end, unless you're in it for 30+ years.

Here's why I don't take charts like that one seriously: those very long term charts are interesting, but are not indicative of performance that you or I will experience. It's pretty easy to end up with a 10-20 year period in stocks with zero real return.

Stocks are just a crap shoot on horizons less than 30 years. The big chart is misleading because it makes you think the stocks are monotonically rising; they're not. Retail investors think, after seeing that chart, that they can just park money in an index fund and it will keep going up. Wait to see their shock when it goes 10 or 20 years without a real return... but that is expected, from stock market history.


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## lonewolf (Jun 12, 2012)

james4beach said:


> The reality is that no individual stays invested in stocks for 50 or 100 years. *Everyone is timing the markets to some degree*; stock investing is extremely sensitive to when you start and end, unless you're in it for 30+ years.
> QUOTE]
> 
> 30 years is just 30 years the top in Japanese stock market is getting close to 30 yrs. Scientists think the earth is 4.54 billion years old most of that time stocks have not been in a bull market.


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## james4beach (Nov 15, 2012)

HaroldCrump said:


> As Canadians, we should look at the price of gold in CAD$ terms since 1970, or whatever.


Absolutely. Thanks for posting that chart -- that's a nice representation. I looked up the exact numbers for 20 year return. Twenty years ago gold was 544 CAD, today it's 1607 CAD. The 20 year annualized rate of return is +5.57%

Now, as a thought experiment, what if someone told you the following:


 Stock XYZ has annualized growth of 5.57% over 20 years
 And even higher recently, annual 11.6% growth over last 10 years! 4%/year better than TSX!
 Unlike other stocks, it can't possibly crash to zero or ever go bankrupt/worthless
 There's no chance of the management ever turning crooked
 During 2008 turmoil when stocks crashed 50%, this one only fell 10% -- and just briefly
 During 2000 when stocks crashed 45%, this one only fell 5%

I dare you guys ... DARE you ... to tell me how someone would respond if they heard of a stock like that. The answer of course: it's a table-pounding "buy".

Or am I wrong? Would nobody ever want a stock with those characteristics? Oh please.

You people don't even realize your heavy biases towards stocks


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## gibor365 (Apr 1, 2011)

Just checked most popular BCE

BCE.CA Growth of $10,000.00
With Dividends Reinvested

Start date: 05/06/1996 
End date: 01/22/2015 
Start price/share: $26.90 
End price/share: $58.65 
Starting shares: 371.75 
Ending shares: 712.05 
Dividends reinvested/share: $24.20 
Total return: 317.62% 
Average Annual Total Return: 7.93% 
Starting investment: $10,000.00 
Ending investment: $41,746.62 
Years: 18.73 


BCE.CA Growth of $10,000.00
Without Dividends Reinvested

Start date: 05/06/1996 
End date: 01/22/2015 
Start price/share: $26.90 
End price/share: $58.65 
Dividends collected/share: $24.20 
Total return: 207.99% 
Average Annual Total Return: 6.19% 
Starting investment: $10,000.00 
Ending investment: $30,792.33 
Years: 18.73 
c


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## james4beach (Nov 15, 2012)

OK, I agree that's pretty great with BCE. Slightly higher 20 year performance than gold, yes that's good.
And in the 2000 bear, it fell -30% (that includes dividends)
And in the 2008 bear, it fell -35% (again, with dividends)

So no question BCE exhibits great characteristics but oh man did it take a dive during those market crashes.

But my question stands: how about my stock "XYZ" ... which didn't fall anywhere near as catastrophically as BCE during rough markets, and which exhibited *nearly identical* 10-year performance and only slightly worse 20-year performance?

(You may also want to take note that you're comparing at a time when BCE is flying to new highs and gold is actually in a slump, so the numbers are skewed in BCE's favour due to short-term timing)

C'mon guys... convince me XYZ offers a horrible trade-off that nobody should ever want


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## gibor365 (Apr 1, 2011)

Another popular stock FTS
20 years Total return: 1,046.02% 
Average Annual Total Return: 13.33% 

TD
Total return: 1,610.83% 
Average Annual Total Return: 15.68% 

RCI.B
Total return: 719.37% 
Average Annual Total Return: 11.40% 

ENF
Total return: 838.23% 
Average Annual Total Return: 21.92%


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## gibor365 (Apr 1, 2011)

> And in the 2000 bear, it fell -30% (that includes dividends)
> And in the 2008 bear, it fell -35% (again, with dividends)


So what?! And Gold in 2012 bull fell 30% .... 

People who lived on dividends continue getting increased every year income... people who reinvested, were getting cheaper shared... and what such people would do with GLD?!


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## humble_pie (Jun 7, 2009)

i've never been a gold bear, i'm presently happy enough owning super-volatile detour gold & a LEAPs diagonal call spread strategy in goldcorp. But this thread is causing me to rethink, since it's suggesting from many angles that the performance of gold, when one goes out as long as 20 years, is noticeably inferior to quality common stocks.

here's a 20-year chart comparing Central Fund, Royal Bank & CN Rail. CEF lags below the common stocks.

the chart shows share performance only. Dividend payouts are neither included nor compounded.


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## donald (Apr 18, 2011)

With only 6% of your total portf and 92% in fixed gic's what is your long-term plan James?
are you preparing to buy into the real estate market?
Waiting for equities to become attractive?
Waiting to further allocate more to gold?
Or is the plan to just stay the course with gic's until retirement?
I don't really understand why you have such a low exposure to gold if you like it so much
You don't seem to have diversification(92% in fixed)


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## donald (Apr 18, 2011)

srry 91%


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## Toronto.gal (Jan 8, 2010)

james4beach said:


> 1. And in the 2000 bear, it fell -30% (that includes dividends)/And *in the 2008 bear, it fell -35% (again, with dividends)/but oh man did it take a dive during those market crashes.*
> 2. You people don't even realize your *heavy biases towards stocks*


*1.* Stocks dive during market crashes, but did you go bargain hunting after such crashes, or were you too stunned by the spectacular dive of a lifetime, which given your age [early 30's?], 2008 would have been it? 

You recently [in 2014] experimented buying multiple stocks at multi-year highs for a short-time, but it doesn't appear you ever experimented at multi-year/all time lows for longer-term, which is surprising for a bear like you [though you said you were a short-seller]. Btw, those 'wonderful dividends' would have paid 25% or more of multiple 2009 investments by now. 

In the BCE example as mentioned above, it would have paid much higher. If you had bought in late 09 at $26 [never mind early 09, when most of us were still in panic mode], even if the dividend had remained unchanged at $1.56 annually [it's at $2.47 now], you would have reduced your initial investment by over 30% in that 5 year period [closer to 45% with increased dividends taken into account]. Had you invested $5K, you would have received around $1.5K in dividends since 09 [in the unchanged div. scenario, but over $2K with the actual increases]. 

*2.* I don't think there is a need to repeat that, just like there is no need for us to repeat ad nauseam that you're a bear. Actually, you don't even fit the definition of such. What I just came to realize, is that you have near zero tolerance for volatility, which is fine. As they say, there is the 'The Bulls, The Bears And The Farm.'


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## Beaver101 (Nov 14, 2011)

^


> ... As they say, there is the 'the bulls, the bears and the farm.'


 ... Lol! 

Recalling with that success with multi-year highs, imagine what you could do with multi-year lows. :wink: : 



> > *Originally Posted by james4beach*
> >
> > Recently I bought:
> > AC.B
> ...


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## HaroldCrump (Jun 10, 2009)

Let's think about this gold vs. equities performance from an economic perspective.
Equities represent a share of a business, correct?

From a logical perspective, it is fundamentally impossible for gold to outperform equities over any sustained period of time.
This is true regardless of whether we have good economic growth (let's use GDP as a measure, although it is not ideal), or there is long term stagnation/deflation.

In an environment of say 3% - 6% global nominal GDP growth, gold should slightly under-perform equities.
This is because the equities represent a share in growing businesses.

During stagflation, gold should do better than equities, but not for extended periods of time.
This is because if real purchasing power is not growing, the demand for gold will not be strong.
Yes, supply is becoming more scarce over time, but every decade or so there are mining spurts and technological innovations that increase future production.

During deflation, gold will simply reflect the falling nominal prices (i.e. increasing purchasing power).

Where gold does well, and out-performs equities, is during periods of economic uncertainty, fear, wars/conflict, etc.
It also does well during periods of inflation, or expectation of inflation.

Residents of countries with unsound monetary policy (i.e. a progressively weakening currency) will do well with gold.
Such as Italian, Japanese, Greek, Russian, etc. residents would have done very well with gold.
But even there, gold does not go up in a straight line.
There is no easy way to smoothen consumption for a household, or a retiree, using gold.

The question for us now is - whether our CAD$ monetary policy reflect this kind of deliberate & intended weakness.
Is the BOC bent upon weakening the CAD$ down to the late 1990s & early 2000s levels (i.e. between 60c - 70c).

If that is the case, then gold as a % of your assets in gold will hedge against that.
What that % should be varies with individuals.

James4B's 6% allocation to gold is definitely on the higher side.
That is a big bet on massive devaluation of the CAD$.

Which is why I was surprised in that other thread when James4B said he was "shocked" by the devaluation of the CAD$.
To me, that is fundamentally inconsistent.

If you were not expecting massive devaluation of the CAD$, why hold 6% in gold.
And if you have decided to hold 6% gold, you should not be shocked - you should be fully expecting it.


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## fatcat (Nov 11, 2009)

james4beach said:


> Absolutely. Thanks for posting that chart -- that's a nice representation. I looked up the exact numbers for 20 year return. Twenty years ago gold was 544 CAD, today it's 1607 CAD. The 20 year annualized rate of return is +5.57%
> 
> Now, as a thought experiment, what if someone told you the following:
> 
> ...


S & P 500 1995-2015:

Total S&P 500 Price Return ... 335.443%
Annualized S&P 500 Price Return ... 7.633%
S&P 500 Return (Dividends Reinvested) ... 528.722%
Annualized S&P 500 Return (Dividends Reinvested) ... 9.628%

http://dqydj.net/sp-500-return-calculator/


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## zylon (Oct 27, 2010)

Gold's performance should be compared to currencies; ie CAD USD EURO et cetera.

Gold equities can be useful in comparisons to other equities.

Here I've compared SGDM (Sprott Gold Miners ETF) to BAM (Brookfield) and CNI (Canadian National).
I've used the US symbols for BAM.A and CNR so that exchange rates don't cloud the picture.

This is the comparison since inception of SGDM:









-full size: http://stockcharts.com/h-sc/ui?s=SGDM&p=D&st=2014-07-15&en=today&id=p66174519333

It's possible that gold equities bottomed in Q4 2014.
Here is the comparison since Nov 1, 2014:









-full size: http://stockcharts.com/h-sc/ui?s=SGDM&p=D&st=2014-11-01&en=today&id=p86550496294

Fact sheet for SGDM:
http://www.sprottetfs.com/documents/pdfs/sgdm-fs-20141231.pdf


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## humble_pie (Jun 7, 2009)

as always with gold - a store of value that has baffled & delighted every culture since the dawn of recorded history - moderation rules at the end of the day.

it's more than just a side-by-side progression of numbers since bretton woods or since 1985 or last 10 years or whatever. 

as james4 says, gold won't ever go bankrupt. It'll always have value. This is an excellent observation imho. No doubt related to HC's point about how gold acquires even more lustre in unstable nations. Fact is, the world is getting more unstable, not less.

then there's the contentment factor for individual investors. This can't be quantified although it's a well-known phenom. Some folks just plain _like_ AU. So if they're happy & they know it, who are we to preach on about outperformance statistics?

remember Argo? he was probably no more than 25 & already a genius investor when he suddenly fessed up that his dream was to dive into a pool of gold coins & swim around. Argo's fave PM holding was Argonaut Gold, of course. It's only dropped by about 65% ... but what a waterchute swim it was!


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## HaroldCrump (Jun 10, 2009)

From what I recall, Argo had 25% allocation to precious metals, including PM equities and physical holdings.
Apparently, that was the recommendation of Harry Browne or some such legendary investor.


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## fatcat (Nov 11, 2009)

humble_pie said:


> as always with gold - a store of value that has baffled & delighted every culture since the dawn of recorded history - moderation rules at the end of the day.
> 
> it's more than just a side-by-side progression of numbers since bretton woods or since 1985 or last 10 years or whatever.
> 
> ...


a couple of things, to say that gold will always have value is certainly true but as an investor the question is what kind of value will it have relative to other asset categories in which one can place capital ?

second, i actually think that the world is getting more stable, there is now less war than at any time in history, there is less poverty and the number of people going hungry is dropping, the ongoing trade agreements are stitching the world together as never before when it comes to moving goods and services across the borders which will spread wealth quickly

i think that gold is currently (not so much in the past) underpinned by powerful political ideologies that actually distort its value (and relative risk) ... it is a darling of the right wing and the anti-central bank crowd but central banks are going nowhere, not now, not ever as far as i can see

i even think that the gold as armageddon hedge is no longer true in an age of antibiotics and insulin and any number of other drugs that sustain life

it is beautiful (i love precious metal coins) and it certainly can be very profitably traded ... i just don't see the case anymore for large amounts of gold in any portfolio

buffet is right on gold i think


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## humble_pie (Jun 7, 2009)

^^ je crois que non.

we'll have to wait for the young man to return, but as i recall argo's TFSA was his principal investment account & it had zero PM. Instead it held ... as we all know ... the famous ... argo's 5-pack ...

argo was very young, so he hadn't had enough time to accumulate much in the way of non-registered account holdings. What i recall is that he used to alternate between options in SPY (when market was rising) & options in GLD (when market was falling.) These are a common pair trade.

then i suppose he had a few shares of AR but i've no recollection of 25% in PM. Possibly, in his enthusiasm, he said that he _wished_ he could have 25% in PM?


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## fatcat (Nov 11, 2009)

HaroldCrump said:


> From what I recall, Argo had 25% allocation to precious metals, including PM equities and physical holdings.
> Apparently, that was the recommendation of Harry Browne or some such legendary investor.


harry brownes permanent portfolio is really pretty interesting but has not fared so well of late 

prpfx has performed very poorly over the last 5 years and marginally better over the last 10

View attachment 3298


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## HaroldCrump (Jun 10, 2009)

What I would find scary about holding large amounts of gold (such as 6%, never mind the 25%) is that there is nothing stopping the major world governments & central banks from revaluing gold at some ridiculously low nominal valuation using their fiat.

Think about this for a minute...all it requires is a coordinated action by the top 5 major central banks/world governments.
Say the BOE, BOJ, ECB, Fed, and SNB (BOC doesn't matter, sorry, because we have no gold).

Kinda similar to how FDR re-valued gold at $35 by fiat in 1934.

We already have unprecedented levels of coordination among these 5 major central banks - coordinated QE, currency swap agreements, LOCs, ERM agreements, etc.)
It is only an additional step to say we are all re-valuing gold at (for e.g.) $100/oz USD = €85 = ¥1,500 etc.

This type of thing has happened at least 3 times before, incl. the gold revaluation by FDR in 1934.
The second time was the Bretton Woods.
And the third time was in 1971 when Nixon closed the gold window, essentially allowing the USD & other world currencies to float against gold.

It is not an end-of-the-world kind of scare-mongering.
All it requires is coordinated action among the top 5 governments/central banks.

Under what circumstances can this happen?
It can happen when the world economy is in deep debt-driven financial/credit crisis, such as the one in 2008.
At that time, QE helped prevent a complete financial collapse.
QE may not work next time.
Or, more likely, in order to perform further QE, the gold devaluation may be required (to avoid completely wiping out your currency).


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## humble_pie (Jun 7, 2009)

fatcat said:


> second, i actually think that the world is getting more stable, there is now less war than at any time in history, there is less poverty and the number of people going hungry is dropping, the ongoing trade agreements are stitching the world together as never before when it comes to moving goods and services across the borders which will spread wealth quickly



??

we must have the usual weird quebec pov then

just the other night at dinner we were all saying how the Sochi olympics had been the very last innocent moment the world has known in modern history

right after Sochi came Crimea & then the planet exploded into flames with wars, bombings, ebola, kidnappings, massacres, soldier assassinations, police murders & beheadings ..

the parking ticket security forces in my community (not policemen, just guys in uniform who patrol the streets looking for errant cars & dogs off leash) are all getting bullet-proof vests because they've been threatened by enough madmen, the city has decided they're at risk of armed attack.


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## HaroldCrump (Jun 10, 2009)

humble_pie said:


> ^^ je crois que non.
> we'll have to wait for the young man to return, but as i recall argo's TFSA was his principal investment account & it had zero PM. Instead it held ... as we all know ... the famous ... argo's 5-pack ...


Refer *this post*.
Clearly states that he has 25% of portfolio in gold.


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## fatcat (Nov 11, 2009)

humble_pie said:


> ??
> 
> we must have the usual weird quebec pov then
> 
> ...


two things, i think the world, especially the first world is experiencing a lot of stress, personal, individuals stress so i am not saying the world is an easy place to live (it has always been hard in the third world).. in the first world there is a huge gap between rich and poor as has been noted

second, violent crime in north america is dropping like a rock off a high building, really going down ... i suspect the parking guy wearing bulletproof vests has more to do with the vest salesman taking the parking department manager out to lunch and successfully scaring the shite out of him

part of the huge and profitable "security theater" business



> Refer this post.
> Clearly states that he has 25% of portfolio in gold.


hc, yes you are right on argo, be interesting to see where is is now ...


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## humble_pie (Jun 7, 2009)

HC u are a research pearl beyond price. Why would u be fretting about Mark as Read when clearly you are able to memorize the entire content of every single post in cmf forum since its creation?

the 50% in hand-picked dividend payors must have been the startup 5-pack in the TFSA. As for the other 2 slightly odd choices, we should keep in mind that argo was only about 24 years of age at that time. Presumably today he's an older, wearier & wiser man.


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## humble_pie (Jun 7, 2009)

fatcat said:


> violent crime in north america is dropping like a rock off a high building, really going down



but most of the world is *not* north america

it's the total planet i was talking about


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## james4beach (Nov 15, 2012)

Personally I see a higher risk of an arbitrary company's management/accountants destroying a company, than government action that values gold down to nil.

Company equity getting wiped out happens with alarming regularity. Bre-X, Enron, every Dot Com stock, virtually every US bank, many US REITs, Nortel, RIM, ... the number of instances of equity getting wiped out is on the order of hundreds of instances within the last twenty years (even just limiting to large caps)!

In 2008/2009, even a couple beloved banks of ours -- CIBC comes to mind -- had negative equity position. They got wiped out, briefly, before getting re-inflated.

So again: that's hundreds of large cases of equity being wiped out, vs only a couple instances in modern history of gold getting completely wrecked by government policy. I would worry a lot more (and do worry) about say RBC wiping out your equity through their reckless off-balance-sheet derivatives gambling, than I would about the government confiscating or revaluing gold.


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## james4beach (Nov 15, 2012)

Toronto.gal said:


> you have near zero tolerance for volatility


How can that possibly be true, when I hold gold? (which can be very volatile). I also engaged in much short selling in the past, and one tolerates tremendous volatility in position sizes when short selling.

I'm not opposed to volatility or risk. I just don't like the risk/reward tradeoff offered by our current stock market, which is at multi-decade highs, and reliant on artificial stimulus. I see it as a place for gambling, but can not deploy serious capital into such over-valued markets.

I also don't like the rampant fraud, refusal to learn from the past (i.e. the Canadian banks are experiencing insane derivatives growth right now -- learned nothing from '08) and inability of the justice system to prosecute any serious financial crimes. These all go into why I avoid stocks: *I don't like the risk/reward tradeoff.* I don't trust corporate executives -- fraud is rampant -- and I don't want to entrust my money to that system.

Problem isn't volatility.


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## tenoclock (Jan 23, 2015)

Gold is not an investment, it never was. Just like holding any currency is not really an investment. It's simply a store of value, a hedge against inflation or the currency of a country. Most people hold gold long term for that reason alone. I personally would never put all my eggs in one basket - and that means I would never put all my portfolio in one currency. Imagine the Canadian economy tanking and everyone's portfolio is worthless. Being a holder of gold then will mean you don't have to eat cat food in retirement.


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> ... The reality is that no individual stays invested in stocks for 50 or 100 years.
> *Everyone is timing the markets to some degree*; stock investing is extremely sensitive to when you start and end, unless you're in it for 30+ years.


That's where I wonder about the comparison over 10 years for gold versus the TSX ... how many are putting in a lump sum and letting it sit for 10 years?
The only ones I can think of off hand are those winding down some sort of business who have a lump sum to invest.

Despite being "retired" for 27 years - Mom's money is being paid out in small amounts which she is deciding where it goes (including fortunately for us kids - some is being given to us).


Then too ... having CPP, pensions and RRSPs (personal & LIRA) - I'm not sure why 30+ years is such a challenge as some are 30 years old stocks in their accounts.


Cheers


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> ... I dare you guys ... DARE you ... to tell me how someone would respond if they heard of a stock like that. The answer of course: it's a table-pounding "buy".
> Or am I wrong? Would nobody ever want a stock with those characteristics? Oh please.


AFAICT ... you are promoting "dump stocks & stick to GIC/Gold" ... which is a totally different question.





james4beach said:


> OK, I agree that's pretty great with BCE. Slightly higher 20 year performance than gold, yes that's good ...
> So no question BCE exhibits great characteristics but oh man did it take a dive during those market crashes.


Dives only affect the outcome if someone sells at that point, the company disappears or if the end point is when the dive is in effect ... so I'm not sure why it's relevant in this comparison.

Or are you trying to compare a "buy/hold" gold investor against a "market timing" stock investor?




james4beach said:


> ... (You may also want to take note that you're comparing at a time when BCE is flying to new highs and gold is actually in a slump, so the numbers are skewed in BCE's favour due to short-term timing) ...


I believe you picked the time frame.




james4beach said:


> ... C'mon guys... convince me XYZ offers a horrible trade-off that nobody should ever want


Several who like stocks have indicated they *own* gold ... so I don't believe anyone is saying to avoid gold.


Cheers

*PS*

The discussion seems to be around the amount/role that each should play.

Since you seem convinced the trend will continue ... what is your new target for your gold allocation? Twenty percent? Sixty percent? Ninety percent?


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## Causalien (Apr 4, 2009)

Whoa, How did Argonaut gold manage to fall this much while physical gold when valued in $CAD is going up.

I also don't get why anyone is happy with gold going up vs cad. It is unchanged vs usd. The value did not go up, we are getting devalued...


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## HaroldCrump (Jun 10, 2009)

Causalien said:


> Whoa, How did Argonaut gold manage to fall this much while physical gold when valued in $CAD is going up.


All PM equities are down since their peak in summer of 2011.
Some are more down than others, such as Barrick Gold, because of their company-specific execution/geo-political issues.



> I also don't get why anyone is happy with gold going up vs cad. It is unchanged vs usd. The value did not go up, we are getting devalued...


Right, but if someone had 6% of their networth in gold (as James4B does), that is a good thing.
Purchasing power has been preserved.
I suppose that is James4B's intent in purchasing gold in the first place.
Gold, fine art, land etc. are traditional stores of wealth, not get-rich mechanisms.


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