“So stocks and bonds have been a terrific investment. But what about the barbarous relic called gold. This is the investment that most people don’t understand and that banks and investment advisors avoid at any cost. Well this most hated investment has gone up 30 X in value between 1971 and today. And remember as opposed to the stock market, gold is far from the high which was $1,920 in 2011. At that point gold had multiplied 55 X. Since 1999, the Dow is down 62% against gold. Very few investors and no investment advisors know this. Nor do they realise that stock markets are in a long term secular downtrend against gold. This trend will not stop until stocks fall by another 90% against gold in the next few years. That will take the Dow/Gold ratio down to 1 to 1 where it was in 1980.
But more importantly, before the next gold bull market is over, gold will be up over 300 times since 1971, in today’s money. That will give a gold price of $10,000+ and a lot more in hyperinflationary money.”
MK note: Some will blanch at the prospect of $10,000 gold, even think it farfetched, but it is that word “hyperinflationary” that drives the big number von Greyerz attaches to a troy ounce of gold. One wonders how many in post-World War I Germany would have believed that a precious metal selling for about 87 marks per ounce in 1918, would sell five years later for over 118 billion marks per ounce. But it did. The investor who thought that he beat the system sufficiently and cashed-out of gold at 10,000 marks per ounce would have seen that money evaporate overnight under the harsh effects of the hyperinflation. Greyerz’ number might seem far-fetched, but not in a pricing framework when you are paying $50 for a coffee at Starbucks and $10,000 for a new suit at Jos. A Banks.
Here’s a graph we put together for our Gold Chartography 101 page on the gold’s performance during the Weimar Inflation in Germany. The numbers in left axis are not a misprint.