Gold again

Is gold such a wonderful long-term investment?

Gold price was fixed for more than 100 years at US $20.65 an ounce. Its price in 1932 was US $20.69 an ounce.

Based on a price of US $ 744.84 in 2007, the price has doubled 5.25 times in the past 75 years.

{The annual compounding rate using the rule of 72 is [(72/75) x 5.25] = 5.04 per cent (actual rate = 4.89 per cent per annum.)}

In real-money terms, the price of gold has barely kept pace with the rate of inflation. So there has been little real-money value capital appreciation in the value of gold over the past 75 years.

If you go back much further, its real-money value has deflated.

Why? Very little gold is consumed - once produced it remains in circulation as jewellery or bullion, so annual production continues to add to availability.