A recent article over at Daily Finance proclaims that “Gold is the Worst Investment Ever.” The author claims “the numbers don’t lie” as he references Jeremy Siegel’s statistics from his book “Stocks for the Long Run” which shows from the year 1802 through 2006, $1 invested in stocks would be worth $755,163 compared to gold which would be worth only $1.95 (both of these numbers are inflation adjusted.) So do these figures prove that gold is the worst investment ever? In short, no. In this article we will see this is an overly simplistic and incorrect way of viewing investments and gold.
First, readers who know the history of gold in the United States know that the country was on a gold standard of some form or another up until1971 when Nixon officially severed all ties of gold to the U.S. dollar. So it is not entirely fair to compare gold “as an investment” when it was backing and acting as a currency for most of this period. Further, gold today should be viewed as an alternative currency to the dollar. Even Siegel noted that the dollar largely held its purchasing power until the 70’s; but by 1990 gold was worth $1.42,