Gold: How the Mainstream Gets It So Wrong

R. Scott Raynovich submits:

In investing it pays to be calm, scientific, and objective. Here at the Rayno Report we believe in looking at and analyzing data. You’re heard about gold the “barbaric relic,” yes? The asset that pays no interest? For years I’ve been perplexed by the mainstream media’s skepticism of the gold rally, so I decided to look more closely at the data.

It turns out that public perception and mainstream TV commentators have had things entirely wrong. Data shows that gold has been outperforming equities for the last 40 years. Gold today is at $1,050. That’s 30X times the gold price of $35 in 1971, when the United States went off the gold standard. That represents a 3,000% gain. The Dow Jones Industrial Average (DJIA) in 1971 traded around 900. It’s now 10,000. That’s a gain of about 10X, or 1,000%, over the same period of time. Gold has outperformed the DJIA by a factor of 3 since coming off the gold standard.

For whatever reason, the mainstream media, the government, the investment banks, and even many Americans appear to have a hard time accepting this. Maybe it’s because it’s harder for them to make money trading gold than it is floating speculative IPOs. For now, you can ignore the clucking of the TV commentators who fear gold is a “dead asset” that pays no interest. Not even close.

In fact, they are still getting it wrong. Mainstream “pundits” like Larry Kudlow and Henry Blodget still scoff at the gold rally, raising eyebrows. It’s as if they don’t understand that politicians want to print money.

Let’s drive home the point. Let’s say the day the U.S.went off the gold standard, in 1971, you invested $100,000 in gold and $100,000 in the DJIA. The gold portfolio today would be worth about $3 million. The portfolio of DJIA-indexed stocks would only be worth $1 million.

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