Gold - a long way to go?

Gold is still trading above $950 an ounce. Crazy high, right? But it could go a lot higher.
Eddy Elfenbein over at Crossing Wall Street notes that over the past few decades, gold has badly trailed stocks.

Here's a look at gold divided by the Wilshire 5000 Total Return Index.

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Paddy Hirsch is a Senior Editor at Marketplace and the creator and host of the Marketplace Whiteboard. Follow Paddy on Twitter @paddyhirsch and on facebook at www.facebook.com/paddyhirsch101
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If gold went up significantly from here, it wouldn't necessarily be a bubble. You wanna talk about bubbles? Take a peek at the US Treasury market. People/countries have been flocking to the "safety" of the dollar for far too long, and guess what's gonna happen when the treasury buble bursts...Gold's going to fly with the collapse of the USD. So will oil and lots of other commodities.

RC, That graph makes no sense by itself, and I agree with Jason J. It's not that we don't understand why gold goes up in uncertain times. There's simply a problem with clarity in that graph. It says nothing. Why not just make a graph with two axes and two lines, one for gold price and one for whatever stock market index you like. Then you can clearly see the historical trends of gold prices and the stock market. You can't just divide one number by another, graph it over time, and expect it to mean somthing.

And by the way, this is my first perusal of this new blog. I like it almost as much as the Sloan Sessions. But I'm shocked.... Scott Jagow looks like that!?!?! I hate seeing pictures of people that I've listened to for a long time on the radio. Nothing like the guy I pictured inside my dashboard all those morning commutes.

The problem with corporations today is spreadsheet management. They only see numbers on some spreadsheet. They then start ranking people which leads to rewards for good numbers. This is ok if the numbers are from a level playing field and not from spun numbers. It does not take long before the bottom ranks are being pressured to make better numbers. These bottom rankers may be following all of the company's guidelines and doing the due diligence to protect the company but the spreadsheet says they are slackers and need to change their ways. The top rankers are put forward as examples of good employees even if they are building a foundation of sand. The company only sees the fallacy when things begin to fall apart. The peer pressure in these situations corrupts everybody or pushes out the employees a company really wants to keep.

What is going on in the graph, is the performance of gold vs the stock market. During financially unstable times, buyers flock to things such as gold to try to save their investments. This very action drives the price higher. Similar to what happened with oil this past year. The stock market tried to hide in oil, corn and similar last year. Remember the sky rocketing price? That's where a lot of that came from. But, before you go jumping in gold, look at what did happen at the end of the 70s and 80. Sure it spiked, but just think of the drop and the sort of losses you could sustain. If you can ride it up and successfully predict it's decline you will do well. However, if you don't sell in time, you could lose your shirt. No different than the housing and oil bubbles. The stock market swings as investers run from ship to ship. "They" are creatures making decisions based on fear and speculation :) I would stay away from items when they are "spiking." But that's just me. If I had a recommendation, I would try to invest in companies you have personally researched. Causes that you believe in are also a good area to invest your money. That's how capitalism is supposed to work. It's the whole reason why stock markets were created. That way a person who has a good idea can find investors to turn that idea into a reality. I hope that we can find our way there again, instead of being creatures based purely on greed.

I'm not ashamed to admit that I don't understand that graph.

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