Gyroscopic Investing

I'm considering an asset allocation strategy, and I need an approximation of the very-long-term average annual returns for stocks/bonds/gold.  I'm looking for total returns, not real returns, because I'll deal with inflation separately.  At longtermreturns.com, I found that since 1926 stocks have returned about 10% per year on average, and 20-year T-bonds about 6% per year.

Gold seems like the hard one for me, since pre-1972 data doesn't mean much.

Does anybody have any suggestions on what average annual gold returns are, or how to find an approximation?  I don't need an exact number, just an approximation, or even a not-too-broad range would be helpful.  I guess some people would say gold returns are about equal to the inflation rate of say 3%.  What do you folks think?

Well in the USA prior to 1972, gold was tied to cash. It wasn't a free-market commodity. So I don't think it's very useful to look at its returns prior to its transformation into a freely-exchangeable commodity because it didn't have any--other than the return on the dollar itself.

For estimation purposes, I would say that a 0% yearly real return could work. So for any given year, account for inflation, and you've got your approximate nominal return on gold.

stuper1 wrote: Does anybody have any suggestions on what average annual gold returns are, or how to find an approximation?  I don't need an exact number, just an approximation, or even a not-too-broad range would be helpful.  I guess some people would say gold returns are about equal to the inflation rate of say 3%.  What do you folks think?

Don't confuse average annual returns with annualized returns or compounded annual growth rate.  The former is B.S., the latter is realistic.  So make sure you don't conflate sources, or just calculate CAGR yourself from the data.

Spot gold prices back to 1968 can be found at gold.org

Depending on the date you take the gold price, an approximate CAGR since 1972  till 4/8/13  is 8.8%

Pointedstick wrote: Well in the USA prior to 1972, gold was tied to cash. It wasn't a free-market commodity.

That's not true.  It was most definitely a free-market commodity.

Gold was traded as a commodity both in New York and London for dollars, and while it trended around and near $35 it was not stuck on $35.

simple:  http://www.onlygold.com/TutorialPages/p ... 0yrsfs.htm
detailed:  http://measuringworth.com/gold/


At various times in the mid- to late-1960's the U.S. and various western european gov'ts tried to suppress the price of gold to $35 by selling into it.  The most famous and admitted such was known as "the London gold pool."

Up until 1971 the foreign central banks (not individuals) could exchange dollars for gold at the official price.  Nixon put an end to that.

Only the U.S. official price of gold was stuck on $35 until Nixon started changing it, and is now still stuck on $42.22.  Yet gold still trades as a commodity for prices other than the official U.S. price.