Tuesday, February 5, 2013

Theoretical Gold Investing Years Since 1980 Using Gold/Oil Ratio

Theoretically according to the gold/oil ratio, gold investing years might include any year when the gold/oil ratio dipped below 15, that is, when the price of oil was more expensive, making an ounce of gold "cheaper" than 15 barrels of oil, say 9 barrels instead of 15 as in 2005 and 2008:

1981  13.13
1982  11.91
1983  14.63
1984  13.11
1985  11.97

2000  10.19
2001  11.78 (gold $271.04/ounce, lowest average annual price for gold since 1980 to date)
2002  13.58
2003  13.12
2004  10.95
2005    8.91 (gold $444.74/ounce)
2006  10.35
2007  10.83
2008    9.53.

Not coincidentally, Vanguard launched both its energy fund, VGENX, and its precious metals fund, VGPMX, on May 23, 1984 when it was time to invest in gold and avoid oil. But if you had invested $10,000 in the energy fund that year, by May 31, 2008 you'd have in excess of $352,000. The precious metals fund did much less well, almost reaching $107,000 over the same period.