The price of an ounce of fine gold
entered this Millennium at $271.1, one of the lowest gold prices in
the previous 20 years. Since then, the price of gold has soared more
than five-fold. Over the same period, the Dow Jones Industrial
Average increased 16.5 percent. Corrected for inflation, gold
returned a whopping 480 percent, while real returns on major stock
market indices in the U.S. and in the euro area were negative - in
double digits.
That was meant to be a "killer" opening statement of a friend of mine, a lawyer and a notorious gold bug, in a heated discussion about the investment allure of what the British economist John Maynard Keynes called the "barbarous relic."
My response was that these
exceptionally strong gold returns were mainly due to (a) what is
considered to be the most serious financial crisis the world has ever
known, and (b) the ensuing Great Recession in developed economies,
representing 60 percent of global output.
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