Looking at Long-Term Data
Many people feel that the strong rise in gold in the last one to one and a half years is only a short phase. (see the image below)
Some think it is just luck and will not last for long. To understand this better, it is important to look at long-term data. When we study many years instead of just a few months, the picture becomes much clearer and more useful.
What the 80-Year Pattern Shows
When we compare gold and the US stock market over the last 80 years, a clear cycle appears.
This comparison is done using a rolling 10-year return view. When gold does better, it stays on one side of the chart, and when US stocks do better, it moves to the other side. This shows that both assets take turns in leading over long periods.
Past Cycles of Gold and Stocks
In the 1940s, gold did better than US stocks. After World War II, US stocks performed better for many years. In the 1970s, high inflation helped gold outperform stocks again for almost a decade. From the 1980s till the early 2000s, stocks once again stayed ahead. Between 2002 and 2011, gold performed better, and from 2011 till recently, US stocks were stronger.
A New Cycle May Be Starting
Now, the data shows signs that gold may be entering another strong phase. So far, we have only seen this for about one year. Sometimes these moves reverse quickly, but if this turns into a full cycle, it can last for many years. History shows that when such cycles become strong, they often continue for a long time.
Why This Time Looks Similar
This period shares many features with past gold cycles. Problems seen in the 1940s are visible again today.
Inflation issues like those in the 1970s are also present. At the same time, asset prices across markets look very high. All these factors together increase the chance that gold may outperform other assets in the coming years.
What It Means for the Future
This does not mean stocks will give negative returns. Stocks can still grow, but gold may grow faster. For example, even if stocks give small returns and gold stays stable for some time, gold can still lead over five or ten years. Because of this possibility, it becomes important to think about gold as part of long-term planning for the years ahead.
