The author of the article explains why investing in gold and investing in gold stocks are two very different investments. This also holds true for investing between gold and silver. He then explains the advantages of investing in gold over the others.
January 9, 2012
Marc Gerstein
Seeking Alpha
To describe gold as a hot investment topic would be an understatement. People talk about it often, often in emotionally charged terms. Indeed, gold has been a hot commodity and even aside from emotion, there is a body of opinion that believes gold should be part of a prudently constructed investment portfolio if for no other reason than its low correlation to stocks. And for the record, correlation with stocks has been non-existent. From 11/18/04, when SPDR Gold Shares (GLD), the ETF that holds gold bullion and tracks the metal’s price, debuted through the end of 2011, the correlation of daily prices between GLD and the SPDR S&P 500 ETF (SPY) was 0.002. But portfolio theory aside, we want more than just low correlation; we also want good returns.
The good news for gold bugs is that we’ve been seeing just that. Figures 1 charts the spot price of gold, and Figure 2 compares price trends for GLD and SPY.
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