Mettle Trumped Metal
Fundamental Investing Won Again as Mettle Trumped Metal
Courtesy of Paul Price
For some reason April 15 makes me think of money. Paying taxes means totaling up gains and losses. It’s a time for seeing which investments worked well and which failed. One of the big themes two years ago was the case for precious metal versus holding cold cash or owning stocks.
Cash did what was expected. If you put money in a CD or a money market you have pretty much what you started with 24 months ago. After inflation, your purchasing power has been slightly diminished if you believe the official CPI-U numbers. My real life bill-paying experience suggests inflation has been much worse than the BLS is admitting.
Gold bugs were clamoring to own the precious yellow metal as a hedge against expected inflation as well as devaluation of the U.S. dollar due to QE programs. Debt ceiling negotiation along with expectations of a European banking failure briefly pushed gold to an all-time high of over $1,900 per oz. True believers in gold didn’t sell as they were sure this was just a preview of the $2,500 – $5,000 price tag that was just over the horizon.
That scenario might play out eventually but, so far, it has proven to be fool’s gold. The gold ETF (GLD) showed a two-year cumulative total return of less than one-tenth of 1% from April 14, 2011 through April 14, 2013.
From the peak close of $185.85 on Sept. 6, 2011, GLD holders have lost 22.54% while receiving no cash distributions. Euphoria has morphed into depression.
…The most surprising result of the past two years is that despite massive money printing by our Federal Reserve Bank, the trade-weighted U.S. dollar actually gained about 8.1% against the world’s other major currencies!
