Michael Hsueh from Deutsche Bank notes that commodities usually underperform inflation over the long-run with gold as the main exception since fiat money regime post-1971. Nonetheless, stocks have done much better.
Key quotes
“Silver (+7.0%), Gold (+1.3%) and Oil (+2.8% WTI) all had good days yesterday. And on a YTD basis, Gold (+21.4%) and Silver (+19.3%) have had standout moves compared with global risk, even if WTI (-26.1%) is down.”
“Although I’m a gold bug since I think fiat money will be a passing fad in the long-term history of money, in my long-term work I’ve always found many commodities difficult to recommend on a buy and hold basis as most underperform inflation over the long run - probably as they are mostly used in production and alternatives are found if too expensive. We also become more efficient at using them.”
“Between 1860 and 1971 (when we moved from a gold-based system to fiat money) the real price of Gold fell by 75% and over 80% for Oil and Silver. Since then, Oil and Silver have only doubled in real terms and are still less than half their 1860 values, but Gold is up 7 times, double its 1860s real level. For context however, the S&P 500 is up 22 times in real total return terms (including dividends) since 1971 and 40,000 times since 1860.”
“Gold is definitely a fiat money hedge but on a total return basis equities have tended to do much better in the long run.”
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