Why Gold is the ‘Trade of the Decade’

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Here at The Daily Reckoning , we do not really care for the hard work of investing…we are too busy watching what’s going on. So, we try to take the sweat out of investing, by reducing it to one investment decision, one time, every 10 years. We call it the “Trade of the Decade”.

At the beginning of the current decade our “Trade of the Decade” was simply to sell the Dow and buy gold. This trade looked like a good one for the first two years of the decade. Then, as the Dow rose from its 2002 low, it looked less good. Now, it’s looking good again.

If you had held onto the Dow stocks you’d be slightly ahead in nominal terms…and slightly behind in real terms. (We haven’t done the calculation…but generally, the stock market has gone nowhere. Subtract inflation, commissions and taxes…and the average investor is probably down substantially.)

Gold, meanwhile, has risen approximately 170%. We feel pretty good about our “Trade of the Decade”. So far. So good.

But the decade is not over. If Richard Russell and the bulls are right, we may regret sticking with gold for the rest of the decade. But what else can we do? Stocks are still expensive. And we doubt that the underlying trends that have pushed up gold to US$700 have fully expressed themselves. The price of the metal was over US$700 – if we recall correctly – the day Ronald Reagan was first sworn in as president, 27 years ago. Then, the dollar – against which gold is measured – was fundamentally much more solid than it is today. Back then, derivatives, the carry trade, private equity and diamond-encrusted skulls had scarcely even been invented.

No, dear reader…there’s no need to get fancy…no need to pay hedge fund managers 2 and 20…no need to increase risk or decrease sleep. We will stick with our “Trade of the Decade” like we stick with our business and our marriage – we want to see what happens next.

Bill Bonner
The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Bill Bonner

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Comments

  1. Bill,

    In your second last paragraph you said “… the dollar– against which gold is measured –”

    You have it back to front. It should be:

    “Gold — against which the dollar is measured…”

    Regards,

    Jim

    Jamwa Davies
    September 10, 2007
    Reply
  2. Whether you hold gold or not you’ll,one way or another, pay for all those bonuses bankers collared whilst packaging garbage and selling it to each other. Their buddies, the central bankers, will now print even more money to get the books balanced so although those same central bankers may allow the price of gold to rise a bit it still wont rise enough to cover the extra currency that’s being created whilst you read this.

    Reply

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