Is Gold Still Relevant?

There’s no investment that is more polarizing than gold.

People hate it or love it.

If someone is a diehard gold fan they are termed a “gold bug.” The only term that might even come close are “Bogleheads.” A term often used for people that are diehard followers of the late John Bogle.

But there’s no “deep-value-bug.” Or “buy-and-hold-bug.” Or even “diversification-bug.”

But gold is different.

Gold has been traded, hoarded and held for emergencies for 5,000 years. If you are here on this planet now, then there’s a good chance one of your distant ancestors had to use the gold around their neck to buy freedom, food or safety.

But… does gold matter anymore?

Do people still use gold as a place of safety? An insurance policy? Or a place to put their money until the storm passes?

The only way to get this answer is to look at all the stock market corrections/crashes over the past twenty years and then ask, “do people still moved into gold when the world gets scary?”

Let me show you what gold is trying to tell you.

Below are seven price charts showing us what gold is trying to tell us.

The biggest Stock Corrections of the past 20 years:  

  1. The 2000 Dotcom crash = -50%.
  2. The 2008 Global Financial Crises = -58%
  3. The 2010 Flash Crash = -15%
  4. The 2011 Debt Ceiling Debacle = -20%
  5. The 2015 stock market fall = -13.5%
  6. The January 2018 correction = -10%
  7. The current 2018 to 2019 correction = -20%

Each of the seven charts contain four assets: stocks, bonds, US dollars and gold.

What are these four assets trying to tell us?

Let’s find out.

Each of the seven charts below has one vertical line. This line represents the bottoming of the stock market correction. And each chart shows the entire stock correction from peak to bottom and then back to breakeven again (except the last chart as the market hasn’t gotten back to breakeven).

2000 Dotcom Crash = Stocks vs Gold

As stocks started falling in 2000 during the dotcom crash gold was a place of safety. And as stocks rose out of their bottom gold was a place of safety.

Bonds were also a place of safety before and after the stock market bottom. US Dollars however only held up going into the bottom.

2008 Global Financial Crises = Stocks vs Gold

As stocks fell during the 2008 Global Financial Crises gold was a place of safety. And as stocks rose off their bottom gold was a place of safety.

Bonds were also a place of safety before and after the stock market bottom. US Dollars however were plus/minus as a place of safety. Yes, they didn’t fall but their actual price didn’t rise.

2010 Flash Crash = Stocks vs Gold

As stocks fell during the 2010 Flash Crash, gold was a place of safety. And as stocks rose off their bottom gold was a place of safety

Bonds were also a place of safety before and after the stock market bottom. US Dollars however were strong into the bottom and weak afterwards.

2011 Debt Ceiling Debacle = Stocks vs Gold

As stocks fell during the 2011 Debt Ceiling Debacle gold was a place of safety. And as stocks rose off their bottom gold was a place of safety though with some volatility

Bonds and US Dollars were also a place of safety before and after the stock market bottom in 2011

As stocks fell during the 2011 Debt Ceiling Debacle gold was a place of safety. And as stocks rose off their bottom gold was a place of safety though with some volatility

2015 Stock Market Correction = Stocks vs Gold

As stocks went up and down 13.5% in 2015 and 2016 gold was NOT a place of safety going into the 2016 bottom. But then gold turned up and finished significantly higher by the time stocks got back to breakeven.

Bonds however were a place of safety during this up and down, back and forth correction. US Dollars however were plus/minus as a place of safety.

2018 January Correction = Stocks vs Gold

As stocks fell at the beginning of 2018 gold and bonds fell along side stocks, though not as bad, they still fell.  

And as stocks rose off their bottom from this 10% correction, gold and bonds were flat to down (this by the way was one of the reasons why I knew the January 2018 correction was going to stay small… there was no panicking.)

And for the first time US Dollars took the primary role of the place of safety both before and after the bottoming of stocks.

2018 September Correction = Stocks vs Gold

As stocks fell gold was a place of safety AND as stocks rose off their bottom, gold continues to be a place of safety.

Bonds and US Dollars have also been a place of safety during this current correction.

So…

Is gold still relevant?

Yes.

Every single correction over the past 20 years, gold was telling you whether you should be worried or not. When it didn’t move higher, the stock market did and vice versa.

And the best protection came when the stock market continued to fall past the negative 20% mark.

Gold is alive and doing its job during the scary times.

But what’s the best way to position your money in gold? How much should you buy? What’s the best stock, ETF or fund? Do you buy the metal or the a fund?

As you know,I do not believe in upselling any of my research once someone is a subscriber of my Fearless Wealth Research service.

The only thing I believe everyone should do is get trained. And I’m biased because I think the results of my Training Course, which is going on its 16th year is the best in the world, but that’s a post for another day.

As far as how to answer all of those gold questions. Next week I will send out an in depth webinar on everything gold and all of my subscribers to my research service will get this for free.

Why it’s important to NOT subscribe to a Gold Newsletter?

Because they will not be agnostic. As there are long(er) periods where you don’t want to own gold (precious metal) investments. The same goes for crypto, pot, small-cap, China, etc. focused newsletters.

The best thing for an investor is to keep that big picture point of view. And continue to weight the evidence.

In Your Corner,

RCPeck-Dig Signature.JPG

RC Peck, CFP

P.S.

What are the price charts trying to tell you? If you don’t listen you are bound to repeat the mistakes of the past. But if you listen then angst, fear and confusion falls away.  And what you are left with is clarity.

There’s a better way. In a world defined by hype, overwhelm and confusion — I will work very hard to put clarity and a powerfully simple approach first. The next step is an easy and insightful conversation.

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