Gold and Energy

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peteyperson
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Gold and Energy

Post by peteyperson »

How could I find out the data going back possibly several decades for the performance of Gold, Gold mutual funds and Energy (Oil & Natural Gas)?

So far all I have can find is a decade worth of stats at best which includes the bumped gains with Gold but doesn't show the realistic long term performance of this asset class. I ask because Gold funds here carry a 5.25% sales load and 1.5-1.7% annual mgmt fees, so I wonder if their usual performance warrants any investment at all. More data would help to make that decision.

Thanks,
Petey
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200 years of spot gold prices

Post by therealchips »

http://www.onlygold.com/TutorialPages/P ... 0YrsFS.htm
200 years of spot gold prices - since 1792

I cannot figure out how to unscramble the data at that site for reproducing here, so I give you just the URL.

I have no special knowledge about the questions you asked. I found that site by searching at google on

"price of gold" 1900 1910 1920 1930 1980

This is brute force, not subtlety. I can't vouch for the accuracy of the data on that site, but this might get you started. Most of the sites I found this way are in PDF format which seems designed to prevent copying and pasting. Sigh.

Editted to add this:

http://goldinstitute.org/markets/1833tab.html is another source.
He who has lived obscurely and quietly has lived well. [Latin: Bene qui latuit, bene vixit.]

Chips
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25 year gains: S&P 500 2013%; Gold funds 637%

Post by therealchips »

Sorry, I leave it to you to make this table look like a table:
S&P beats gold in long term.

Gold has clobbered the Standard and Poor's 500-stock index the last five years, but stocks have romped in the long run. How gold has fared vs. stocks:
Total return*
Investment 1 year 5 years 10 years 15 years 20 years 25 years
Gold-oriented funds 62.9% 52% 51% 10% 41% 637%
S&P 500 -22.1% -3% 144% 409% 992% 2,013%
* - Dividends, gains reinvested Source: Lipper

I understand that you are wondering about how gold (maybe bullion, maybe mining stocks, maybe gold-oriented funds) might reduce volatility in a portfolio holding investments like the S&P 500 Index, and how reducing volatility this way would help or, more likely?, hurt long term gains in the portfolio. This quotation does not answer that question, but it is relevant. I found it at google by searching on

long term performance stock prices gold mining companies

(More brute force searching.) Here is the source of my quotation above:

http://www.usatoday.com/money/2003-01-24-invest.htm

Editted to add this URL, in which the guy speculates that bullion's price will drop as soon as he starts buying it. :lol:

http://dm-productions.com/bonaventure/trib.htm
He who has lived obscurely and quietly has lived well. [Latin: Bene qui latuit, bene vixit.]

Chips
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Re: 200 years of spot gold prices

Post by BenSolar »

therealchips wrote: Most of the sites I found this way are in PDF format which seems designed to prevent copying and pasting. Sigh.

As an aside, if your browser is like mine (a recent microsoft product with the adobe acrobat extension) then you can copy text out of a PDF by first selecting the 'Text Select Tool'. Look on the tool bar at the top. If you see a button with a large 'T' on it, then you can usually click that and then copy text as usual on a webpage. Some pdfs have security in place to prevent this, but most allow it. If you don't see the button with the 'T', then try right clicking on the lower adobe tool bar and select 'basic tools' to show that particular toolbar.

:)
"Do not spoil what you have by desiring what you have not; remember that what you now have was once among the things only hoped for." - Epicurus
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Re: Gold and Energy

Post by raddr »

peteyperson wrote: How could I find out the data going back possibly several decades for the performance of Gold, Gold mutual funds and Energy (Oil & Natural Gas)?

So far all I have can find is a decade worth of stats at best which includes the bumped gains with Gold but doesn't show the realistic long term performance of this asset class. I ask because Gold funds here carry a 5.25% sales load and 1.5-1.7% annual mgmt fees, so I wonder if their usual performance warrants any investment at all. More data would help to make that decision.

Thanks,
Petey


Look here http://www.efficientfrontier.com/ef/997/precio97.htm for returns on gold stocks going back to 1942.

While Chips is correct that the S&P500 outperformed for the last 25 years, if you look at the last 30 years returns for the S&P500 and gold stocks have been virtually identical. Remember also that the last 25 years have greatly favored paper assets as governments have printed money and our own Federal Reserve has pumped massive liquidity into our financial system. During this time the dollar became the safe haven that gold once was. Will these trends continue indefinitely without triggering resurgent inflation and a loss of confidence in paper assets? I doubt it. I'd have at least a little exposure to gold stocks just in case things aren't as rosy as our governments would like us to believe. :wink:
peteyperson
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Re: 200 years of spot gold prices

Post by peteyperson »

Ah! I learn something new. Thanks Ben.

P.S. I also enjoy your quotations, particular the Greek ones.

Petey
BenSolar wrote:
therealchips wrote: Most of the sites I found this way are in PDF format which seems designed to prevent copying and pasting. Sigh.

As an aside, if your browser is like mine (a recent microsoft product with the adobe acrobat extension) then you can copy text out of a PDF by first selecting the 'Text Select Tool'. Look on the tool bar at the top. If you see a button with a large 'T' on it, then you can usually click that and then copy text as usual on a webpage. Some pdfs have security in place to prevent this, but most allow it. If you don't see the button with the 'T', then try right clicking on the lower adobe tool bar and select 'basic tools' to show that particular toolbar.

:)
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Re: Gold and Energy

Post by peteyperson »

Other than the last five years, I'm just wondering whether allocating say 2.5% of a portfolio to Gold mutual funds is likely to be of a drag on performance more than anything else and there are other ways to balance things out with property, emerging markets & global stocks, bonds and cash.

That's why I wanted to see things from a longer term perspective. Both Dave Ramsey (not the best with investment advice) and more particularly Gillette Edmunds dismisses Gold as being an asset class that just doesn't deliver a sufficient return to warrant its inclusion and Edmunds is particularly aware of the benefits of adding non-correlated asset classes to the mix.

Given the other investment options included in the first paragraph, could you give me your thoughts raddr on why you would include it vs a different investment. At 5% sales load and 1.5% annual mgmt fee, it looks like an expensive small part of the portfolio, certainly at first glance.

Petey
raddr wrote:
peteyperson wrote: How could I find out the data going back possibly several decades for the performance of Gold, Gold mutual funds and Energy (Oil & Natural Gas)?

So far all I have can find is a decade worth of stats at best which includes the bumped gains with Gold but doesn't show the realistic long term performance of this asset class. I ask because Gold funds here carry a 5.25% sales load and 1.5-1.7% annual mgmt fees, so I wonder if their usual performance warrants any investment at all. More data would help to make that decision.

Thanks,
Petey


Look here http://www.efficientfrontier.com/ef/997/precio97.htm for returns on gold stocks going back to 1942.

While Chips is correct that the S&P500 outperformed for the last 25 years, if you look at the last 30 years returns for the S&P500 and gold stocks have been virtually identical. Remember also that the last 25 years have greatly favored paper assets as governments have printed money and our own Federal Reserve has pumped massive liquidity into our financial system. During this time the dollar became the safe haven that gold once was. Will these trends continue indefinitely without triggering resurgent inflation and a loss of confidence in paper assets? I doubt it. I'd have at least a little exposure to gold stocks just in case things aren't as rosy as our governments would like us to believe. :wink:
Last edited by peteyperson on Wed Sep 24, 2003 10:18 pm, edited 1 time in total.
peteyperson
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Re: 25 year gains: S&P 500 2013%; Gold funds 637%

Post by peteyperson »

This is partly my concern, yes. I don't know that in the long run it delivers, looks for the initial data you included that it does not. Perhaps it comes down to how often the global market is down and people run to Gold pushing the price way up. Whether the frequency and amount of gain over a short number of years is worth the long term investment is up for question I suppose.

Petey
therealchips wrote: I understand that you are wondering about how gold (maybe bullion, maybe mining stocks, maybe gold-oriented funds) might reduce volatility in a portfolio holding investments like the S&P 500 Index, and how reducing volatility this way would help or, more likely?, hurt long term gains in the portfolio. This quotation does not answer that question, but it is relevant. I found it at google by searching on
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Post by Kramer »

Precious metals, as in the actual hard asset, in the long run return about zero. Precious metals stocks, on the other hand, seem to have a decent real return, albeit probably not as large as broad based stocks. It is difficult to use historical data because past performance has been distorted so much by the previous history of gold as a de facto national currency exchange.

But as raddr has stated, the huge benefit of precious metals is lack of correlation to standard portfolio assets. This raises the returns of a balanced portfolio, and often at the best possible times (eg., 1973-1974,
2001-2003). Looking at it from an efficient market point of view, if they provide so much diversification value, it makes sense that the return is low. You can't look at precious metals returns in isolation, because what seems like high risk on the surface is almost entirely DIVERSIFIABLE risk, meaning it can lower the risk of a larger portfolio.

A big negative, IMO, is the lack of low cost passive alternatives, which is something I'm pretty religious about. There are also big dividend distributions for taxable accounts; the impact is attenuated, however, by the new lower dividend taxes.

Another negative is technology risk. They are manufacturing jewelry grade diamonds in Florida by the bushel load now. De Beers has to distribute specialized kits to jewelry dealers now so they can even tell the difference. I do not know what the situation is with gold, platinum, or palladium.

I blindly bought Vanguard's precious metals fund back in 2000 (taxable account), strictly for diversification, after reading the Intelligent Asset Allocator. When I told a co-worker, he laughed and told me precious metals equities were a loser's game. The precious metals fund has since doubled -- our company's stock, on the other hand, has since declined 90%, of which he was and is a major shareholder.

Kramer
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Post by wanderer »

Kramer wrote:

...But as raddr has stated, the huge benefit of precious metals is lack of correlation to standard portfolio assets. ...

A big negative, IMO, is the lack of low cost passive alternatives, which is something I'm pretty religious about. There are also big dividend distributions for taxable accounts; the impact is attenuated, however, by the new lower dividend taxes....

Kramer


I used to make the case for real estate (in the face of the moronic argument that the CAGR was lower for real estate than for equities) on diversification alone. her second point explains, exactly, why we have been reluctant to invest outside vanguard. waiting on that gold etf.

*****

did anyone ever see the seinfeld episode where jerry meets his female equivalent?

i don't like how kramer keeps using big words like 'attenuated'. :wink:[/i]
regards,

wanderer

The field has eyes / the wood has ears / I will see / be silent and hear
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Post by wanderer »

regards,

wanderer

The field has eyes / the wood has ears / I will see / be silent and hear
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Re: Gold and Energy

Post by raddr »

peteyperson wrote: Other than the last five years, I'm just wondering whether allocating say 2.5% of a portfolio to Gold mutual funds is likely to be of a drag on performance


Quite the contrary. Since 1942 the optimal allocation between the S&P500 and gold stocks would've been about 88:12 and would've returned slightly more than a 100% S&P500 allocation with lower volatility, assuming annual rebalancing.
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Post by aedelswil2429 »

Kramer wrote:
Another negative is technology risk. They are manufacturing jewelry grade diamonds in Florida by the bushel load now. De Beers has to distribute specialized kits to jewelry dealers now so they can even tell the difference. I do not know what the situation is with gold, platinum, or palladium.
Kramer


Hi all

I'm not quite sure about this one, but making diamonds is basicaly just a changing of the structure of one and the same chemical element (C), so if you press a pice of coal hard enough it will change it's pattern / structuer / (don't know the right word, sorry), and become a diamond.

But as there is no other form of gold but the one we know as the metal the making of gold becomes an entirely other matter, as in this case one needs to change the atomic structure of the element used as base.

Just my 002.

take care and index on

philipp
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Post by therealchips »

Since 1942 the optimal allocation between the S&P500 and gold stocks would've been about 88:12 and would've returned slightly more than a 100% S&P500 allocation with lower volatility, assuming annual rebalancing.
Ah, 88:12 is just the kind of quantitative result I was looking for, although the reference didn't define "slightly more" and "lower". Do you have a source, preferably online? Did the study also allow for annual trading and taxation costs associated with rebalancing, and taxation of S&P500 annual dividends?
He who has lived obscurely and quietly has lived well. [Latin: Bene qui latuit, bene vixit.]

Chips
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Post by raddr »

therealchips wrote:
Since 1942 the optimal allocation between the S&P500 and gold stocks would've been about 88:12 and would've returned slightly more than a 100% S&P500 allocation with lower volatility, assuming annual rebalancing.
Ah, 88:12 is just the kind of quantitative result I was looking for, although the reference didn't define "slightly more" and "lower". Do you have a source, preferably online? Did the study also allow for annual trading and taxation costs associated with rebalancing, and taxation of S&P500 annual dividends?


Hi Chips,

The data comes from the Bernstein link provided above. I simply cranked it through my MVO program to find the historically optimal mix without regard to taxation. Undoubtedly, you'd be better off if you could keep your gold allocation in a tax sheltered account which is what I do. Trading costs should be minimal if you use no load funds.
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Post by Kramer »

I used to make the case for real estate (in the face of the moronic argument that the CAGR was lower for real estate than for equities) on diversification alone. her second point explains, exactly, why we have been reluctant to invest outside vanguard. waiting on that gold etf.

*****

did anyone ever see the seinfeld episode where jerry meets his female equivalent?

i don't like how kramer keeps using big words like 'attenuated'. ;)[/i]



They taught us those big words back at Pizza Hut University :D

Just to be extra clear, Kramer is firmly in the male camp, always has been, always will be.

Kramer
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Post by peteyperson »

If Gold shares perform better than Gold, the hard asset, I would like to be able to view data from a selected bunch of return dates to see how it has done. Morningstar only has 5 year history on gold funds and gold mining funds. The William Bernstein info doesn't really provide anything other than an average over time but that doesn't tell me what it did per decade on average to see whether, like Gold, the price could have been up 30 years ago to $600 and never to be seen again, making it very dependent on your exact timing of the initial investment.

What sort of allocation did you take in Gold stocks?

Petey
Kramer wrote: Precious metals, as in the actual hard asset, in the long run return about zero. Precious metals stocks, on the other hand, seem to have a decent real return, albeit probably not as large as broad based stocks. It is difficult to use historical data because past performance has been distorted so much by the previous history of gold as a de facto national currency exchange.

But as raddr has stated, the huge benefit of precious metals is lack of correlation to standard portfolio assets. This raises the returns of a balanced portfolio, and often at the best possible times (eg., 1973-1974,
2001-2003). Looking at it from an efficient market point of view, if they provide so much diversification value, it makes sense that the return is low. You can't look at precious metals returns in isolation, because what seems like high risk on the surface is almost entirely DIVERSIFIABLE risk, meaning it can lower the risk of a larger portfolio.

A big negative, IMO, is the lack of low cost passive alternatives, which is something I'm pretty religious about. There are also big dividend distributions for taxable accounts; the impact is attenuated, however, by the new lower dividend taxes.

Another negative is technology risk. They are manufacturing jewelry grade diamonds in Florida by the bushel load now. De Beers has to distribute specialized kits to jewelry dealers now so they can even tell the difference. I do not know what the situation is with gold, platinum, or palladium.

I blindly bought Vanguard's precious metals fund back in 2000 (taxable account), strictly for diversification, after reading the Intelligent Asset Allocator. When I told a co-worker, he laughed and told me precious metals equities were a loser's game. The precious metals fund has since doubled -- our company's stock, on the other hand, has since declined 90%, of which he was and is a major shareholder.

Kramer
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Post by peteyperson »

I'd welcome thoughts on this 1999 article on Gold returns over the prior decade vs S&P500.

http://www.markethistory.com/support/wh ... 90928.html

Petey
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Post by bpp »

Philipp writes,
But as there is no other form of gold but the one we know as the metal the making of gold becomes an entirely other matter, as in this case one needs to change the atomic structure of the element used as base.


Yes, gold can in principle be made by transmutation from other elements, using particle accelerators for example. Reportedly this has even been done (google on "Seaborg" and "gold" for information), but the cost is many orders of magnitude higher to make gold this way than the gold itself would be worth. You wouldn't generate enough gold to pay the electric bills.

Cheers,
Bpp
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Post by Kramer »

peteyperson wrote: If Gold shares perform better than Gold, the hard asset, I would like to be able to view data from a selected bunch of return dates to see how it has done. Morningstar only has 5 year history on gold funds and gold mining funds. The William Bernstein info doesn't really provide anything other than an average over time but that doesn't tell me what it did per decade on average to see whether, like Gold, the price could have been up 30 years ago to $600 and never to be seen again, making it very dependent on your exact timing of the initial investment.

What sort of allocation did you take in Gold stocks?


Hi Petey,

The Bernstein article refers to prior research (via a link at the beginning) that covers a shorter period, from 1969-1996 or so. For an asset class with such a high standard deviation, and that is so influenced indirectly by governmental decisions with respect to the gold standard, it is hard to think about using time scales shorter than that. Yes, that leads to uncertainty about the asset class in general.

I took a 3% allocation. My portfolio has about doubled in the last three years, so it is still 3%, since the value of the Vanguard fund has roughly doubled in that time. When I got religion about owning low cost passively managed asset classes only, I strongly considered selling it, but decided not to because of the capital gains taxes I would have had to pay. The fact that is has steadily gone up, combined with the new lower dividends taxes, makes me happy about my decision not to sell :) I used the same logic in deciding not to sell my Berkshire Hathaway stock. Those are the only two actively managed funds/stocks I own.

I think you can make a case for inclusion or exclusion from a portfolio. For me, it is really on the bubble as far as investable asset classes go.

Kramer
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