Here are 10 gold charts that every global commercial investment firm is terrified to show their clients. When priced in ounces of gold, major western stock market indexes have performed horribly over the last 8 ½ years. Since, 2002, the US S&P 500 has lost a whopping 78% of its value. The Australia ASX All Ordinaries Composite (similar to the US S&P 500 index) and the UK FTSE indexes have not fared much better, respectively declining 70% and 77% in value. So despite all the hoopla about record runs in global stock market indexes in 2009, the great bubble machines operated by Central Banks have guaranteed that it may take another 20 or 30 additional years before investors break even in nearly every developed stock market index and even some emerging stock market indexes when the returns of these indexes are measured in gold.
What about emerging markets? Goldman Sachs is fond of reminding us that they coined the term “BRIC” for the emerging markets of Brazil, Russia, India and China in November 30, 2001. Despite all the hype about China’s enormous growth in recent years and the fantastic performance of these markets in the last decade, when priced in gold, the Shanghai Stock Exchange has lost 63% in value since the start of 2002. The Brazilian Bovespa Index? It eeked out a 2% gain over this same time period. And the Bombay Stock Exchange? This index actually performed a respectable 20% over an 8 ½ - year period.
Thus, gold's performance slaughtered the performance of the developed global market indexes and that of China, just about broke even with Brazil, and only lost to India. If we look at gold's performance denominated in the world's two leading currencies during this same 8 ½-year investment period, gold soared by 207% denominated in Euros and an even more spectacular 324% denominated in US dollars. Even when priced in live cattle and lean hogs, the value of gold increased enough to buy 1.85 times as many cattle and hogs in a span of just 4 ½ - years. So why has gold performed so well during the early phases of our monetary crisis? Even though Central Banks collude with governments to execute schemes to suppress the price of gold (and silver), because gold has zero counterpary risk, efforts to rig it long term have failed unlike the rest of the casino wonderland of financial products.
Although gold is going through a corrective phase right now, remember that in the article I wrote last week titled, “The Safest Bet During Uncertain Markets”, I warned readers: “As long as Central Banks and their governments scheme against PMs, gold and silver will continue to have sharp, scary drops in the future at times.” Still, the long-term future for gold is still solidly higher. If you look at the above performance of gold against alternative investments, it is easy to realize that all the managers and financial consultants that are jumping on gold’s bandwagon now are enormously late in acting in their clients' best interests (though still early as far as the end game is concerned). Their arguments that gold is only now, a “safe” and “rational” investment, only further expose their lack of understanding about the mechanisms of our global monetary system – a scary reality when they are serving as advisers to thousands of clients whose financial livelihoods depend upon their guidance.
Granted, I wasn’t as early to the party as others with greater vision. But when my research led me to the conclusion that a monetary crisis was inevitable in late 2005/ early 2006, I started advocating gold at about $530 an ounce and silver at $9 an ounce. And what about silver’s performance from 2002 until present day? A mere 290% return (denominated in US dollars) as illustrated by the tenth and final chart (admittedly a silver and not a gold chart, I know).
Again, you may visit the link in the article “The Safest Bet During Uncertain Times” to understand why gold and silver have never been a favored asset of large commercial investment firms. Even with the reality of the deeper stages of the monetary crisis descending upon us, many commercial investment firms are still directing their clients into fiat gold and fiat silver in the form of the GLD and SLV ETFs. In the process of doing so, they are sadly ensuring that their clients will never join the party.
About the author: JS Kim is the Chief Investment Strategist and Managing Director of SmartKnowledgeU, LLC, a fiercely independent wealth consultancy company that guides investors in the best ways to buy gold and silver through the progression of this global financial crisis. His Crisis Investment Opportunities newsletter has significantly beat all major developed stock market indexes since the first day of its launch, outperforming the Australian ASX 200, the UK FTSE 100 & the US S&P 500 each by more than 140% to 150%* since inception (*in a tax-deferred account). JS also maintains an investment blog, the Underground Investor, in which he presents financial stories rarely covered by the mainstream media.