I get the same calls and emails everyone else gets. They tell you gold is approaching all time highs. And they tout how much the price of gold has risen since 2001.

But, why do they pick 2001?

Because gold was at historical lows.

By 2001, gold was nearly two-thirds lower than it was in 1980 and in absolute dollars it is just now back at the 1980 levels. If you use inflation adjusted dollars it is still much lower than the 1980 levels.

There is even more interesting statistical data that contradicts the claims of the proponents of gold.

They tout gold as a hedge against inflation. They claim as the money supply grows and each dollar is able to buy less gold is the play to counter that.

But, it just isn’t true!

From 1980 to 2001 the money supply more than tripled and we saw continual inflation. The US did not see a single year with zero inflation or deflation. But, gold lost two-thirds of its value during that time period!

If you compare the record of gold to real estate then real estate is still the winner today even with the current price corrections. In fact, if you take inflation into account (hey, I’m just take them at their word when it comes to inflation and gold) then real estate would have to drop another 60% and gold would have to top $1000 an ounce for them to be equivalent losers.

The price of gold is just now catching up to where it was in 1980 but it has a long way to go to reach break even in inflation adjusted dollars.

What about comparing gold to the sock market?

No surprise, that traded equity markets beat gold over the same period of time too.