Stock Investing 101

Here is a chart of Gold over the past decade:

As you can see the price of an ounce of gold has gone from around 300 dollars in 2000, the start of the decade, to around 1100+ dollars where it is currently.

Don’t get me wrong, just because the price of a commodity more than triples within a decade does not necessarily mean that there is a “bubble” their. Microsoft is not a commodity, but the price of Microsoft has still increased exponentially over the past 30 years. Google IPO’d at 80 dollars a share and is know more than halfway to 1,000.

Prices can rise significantly. Gold spent almost 30 years doing absolutely nothing. In 1970 the price of gold was 300 dollars an ounce and in 2000 the price of gold was roughly 300 dollars an ounce. All things being equal, the price of a commodity should rise within the price of inflation.

Everyone is counting on inflation soaring, which will likely happen considering all of the deficit spending that is going on within the government these days. However Gold will likely not see much of a boost from its current prices if inflation does soar. Rising inflation within the next 3-5 years is already more than factored in to the price of Gold.

Frankly I just do not see much upside for Gold in the mid to long term. This smells like a bubble to me. We saw it with Crude Oil in 2007-2008, everyone tries to make excuses as to why the price should continue to soar but they neglect that the fundamentals simply do not support the price. In the end fundamentals always win.

I have been wrong before and I could be wrong here, but the time to invest in Gold was ten years ago when the price of Gold was 300 dollars an ounce, at 1100 dollars an ounce Gold is a little too expensive for an investment for me.