The yellow metal has outperformed the S&P 500 so far this century, returning 86% more than the market…
Gold prices have outperformed the markets – S&P 500 – thus far in this century (i.e. since 2000), returning 86% more than the market if both asset classes were indexed at 100 levels starting December 31, 1999, suggests the latest World Gold Council’s ‘Gold Investor’ report for September 2017.
“The current equity bull market, now in its eighth year, is one of the longest in US history – it could very well become the longest. Even so, gold has outperformed the S&P 500 so far this century, returning 86% more than the market if we index both asset classes at 100 on 31 December 1999. Over
the past 17 years, the S&P 500 has undergone two major contractions. Gold, meanwhile, has held its value well, highlighting its appeal as a portfolio diversifier,” the WGC report says.
Seen as a safe haven asset, gold prices have been on an upward spiral since August-mid. According to reports, gold prices have surged nearly 7% from Rs 28,500 on the Multi Commodity Exchange (MCX) to Rs 30,500 till September-mid.
Gold also looks very cheap compared to markets that are highly overbought at the moment, reports suggest. North Korea fears notwithstanding, major valuation averages are regularly hitting fresh all-time highs. As such, the gold-to-S&P 500 ratio is near 10-year lows, meaning the yellow metal is extremely undervalued, WGC says.
It’s worth noting too, that the stock market rally (S&P 500) has been propelled disproportionately by only a handful of tech stocks, such as Apple, Amazon, Facebook and Alphabet. As of August 1, the S&P 500 was up 10.5% year-to-date, but if information technology stocks were removed, the index was up around 7.5%, a significant difference.
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