I received a fascinating mail from Arjun Gupta of Client Associates. He is good friend and also someone who advises me personally on investing.
I thank him for allowing me to share his note with therodinhoods community:
This is the mail he sent me:
Arjun Gupta – arjungupta@clientassociates.com wrote:
Hi,
Gold has shot up from USD 300 / ounce in 1999 to USD 1720 as I write this, providing possible the highest return across different asset classes. There have been a lot of theories about this sharp movement from speculators to the debasement of the USD. As gold is a store of value conventional wisdom tells us that gold prices should be linked to inflation. But this linkage has broken down in the last 12 years as inflation has been low.
Theorists prove that the main source of demand in this time period has actually come from demand in emerging markets (more specifically China & India which have large pools of domestic savings). They conclude by saying that the gold price going forward is going to be highly correlated to emerging market demand.
Some other facts about Gold Prices
The enclosed file gives the gold price history in INR dating back to 1925. Here are some interesting facts and figures on the actual returns of gold over various time periods:
|
Period
|
Since 1925
|
Since 1947
|
Last 50 yrs
|
Last 25 yrs
|
Last 15 yrs
|
Last 10 yrs
|
Last 5 yrs
|
|
Gold price then
|
18.75
|
88.62
|
119.35
|
2140
|
5160
|
4300
|
8400
|
|
Gold price today
|
26400
|
26400
|
26400
|
26400
|
26400
|
26400
|
26400
|
|
No of times appreciation
|
1408
|
298
|
221
|
12
|
5
|
6
|
3
|
|
Return
|
8.8%
|
9.3%
|
11.4%
|
10.6%
|
11.5%
|
19.9%
|
25.7%
|
|
Period
|
Appreciation (No of times)
|
Return
|
|
1930-40
|
1.00
|
7.2%
|
|
1940-50
|
1.75
|
10.7%
|
|
1950-60
|
0.13
|
1.2%
|
|
1960-70
|
0.65
|
5.1%
|
|
1970-80
|
6.21
|
21.8%
|
|
1980-90
|
1.41
|
9.2%
|
|
1990-00
|
0.38
|
3.2%
|
|
2000-10
|
3.20
|
15.4%
|
Gold has provided double digit returns in 3 of the last 8 decades.
Best Regards,
Arjun Gupta, CFPCM
Partner, Client Associates
126 – C, 12th Floor, Mittal Court
Nariman Point
Mumbai – 400 021
tel + 91 22 22834242 | fax + 91 22 22049303 | mobile +91 9820319090 | email arjungupta@clientassociates.com www.clientassociates.com
Winner of CNBC TV-18 Best Financial Advisors Award 2008
CELEBRATE LIFE WITH CLIENT ASSOCIATES
****
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