Gold has a traditional role as a store of value and thrives on fears of currency debasement and inflation. So when the ECB expresses its willingness to do all it can to rescue the euro and the Fed ponders the prospect of another round of quantitative easing, it is no wonder that the demand for, and price of, gold would rise.But this does not mean that gold is always a great investment. In fact, when I was a young man in January of 1980 gold reached an historical high point of 850$ while at the same time the Dow Jones Industrial Average was indexed at 825.
Today, gold's price is 1730$, but adjusting for inflation, it would need to be 2363$ for it to have yielded a "zero percent return" over the past 32 years. Indeed, had you bought gold in 1980, you have received a negative return on your investment.
During the same period, the Dow has risen to 13322 and needed only to reach 2294 to yield an inflation-adjusted zero-percent return. In fact, it is 5.8 times larger than that and so has yielded a real, inflation-adjusted return of 480% over the 32 year period in question.
