THE SECRET GUIDE TO INVESTING IN GOLD
In this book, you’ll learn how to build wealth, save money on taxes, and which of the many gold investment opportunities are the most profitable.
Gold has a five thousand year old history and considered a store of value. Stocks on the other hand can go down to zero and cause mayhem for companies as we noticed with Lehman Brothers. In addition, we have noticed during certain periods the value of dollar goes down significantly, but value of gold can never become zero.
Stock and gold prices usually have a negative correlation with gold increasing in value when stock market goes down. This trend has been noticed in many of the bear markets in the last few decades where S&P 500 went down by over fifteen percent and gold was able to outperform the stock market.
By investing in gold you will be able to achieve true diversification and protect your investment portfolio if stock market crashes.
Over long term, we notice a trend that highlights the fact that gold does work like a stock market hedge. For instance, in a five-year time period, when S&P was moving up, gold rose fifty-nine percent of those weeks but, it went up 98% of the time in situations where stock market experienced a drop.
Similarly, if we analyze data for the last 45 years we find that S&P 500 closed lower compared to previous 260 weeks on almost one-fourth of the total Friday afternoons. At those times, average five-year gain for gold was 135%. Additionally, during twenty percent of slumps in equity market, average gain gold maintained was 181% compared to previous five-year period.
It is also worth mentioning here that over five-year periods, a twenty percent drop in stock market is a not a rare incidence. It has occurred twice during the 1970s, briefly in 2003 & 2005, and again in early 2009 where a 41% 5-year loss was experienced.
As we can see in the below graph, gold prices and its total value have always been moving in the upward direction.
A close examination of data overtime show how strong gold has been compared to stock market.
Dow/Gold ratio is used for tracking performance of shares compared to gold. This ratio counts the number of units of DJIA (Dow Jones Industrial Average) can be purchase for 1 ounce of gold.
The above graph clearly shows that the ratio rose to 43 ounces in the year 1999 and overall it averaged at 15 ounces. Presently, it is at just over 25 ounces.
This is the best time to make an investment in Gold IRAs. Recently, the stock market celebrated a long stretch of uninterrupted gains spanning 3,542 days. Historically, this is considered one of the most prolonged bull runs.
Due to its negative correlation with the dollar and equities, prices of gold have gone down from the time they hit $1,349 mark last January. Since, it is likely that the stock market will correct itself very soon, the dollar will most probably fall and consequently there will be a colossal reversal in the price of gold.