Gold a Drag on Long-Term Portfolios
Our view on gold is that it's a vehicle for traders, not long-term investors. Consider that gold hit its all-time high in 1980 at $850 an ounce. To have merely kept pace with inflation over the past 27 years, its price would now need to be at $2,270/oz. Unfortunately, it's currently only around $650/oz. In other words, even after doubling over the past five years, gold is $1,670/oz below break-even on an inflation-adjusted basis. That's a 71%+ loss in purchasing power.
How do stocks compare? Glad you asked. If you had bought stocks (as measured by the S&P 500 index) at their highest closing price of 117 in January 1980, the index would now have to be around 313 to have kept up with inflation. Currently it's trading around 1520. That's almost a 400% inflation-adjusted return even before adding in the dividends. Get the picture?
I'm not saying that skilled short-term traders (a small population, indeed) can't do well in gold. They can, as in any volatile commodity. But getting an accurate take on the coming price action is a challenging task for your average man in the street. The experts, as usual, are in disarray. Long-time gold bull Richard Russell thinks stocks are the better bet going forward, while Howard Ruff, another long-time fan of gold, is as bullish as ever. 
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