The trading was underwhelming on the first day after the long holiday weekend, with gold drifting slightly higher in opposition to a stronger dollar.
Gold was up $0.08 this morning to $1,574.88 and silver was down $0.09 to $28.30, bringing the silver/gold ratio back up 55.6.
Did someone forget to ring the opening bell this morning? With the dollar moving higher one would have expected weakness in commodities, but the little trading going on yesterday early mainly to the upside with gold, crude oil, palladium and copper all higher. Silver and platinum are slightly down, but the price movement is so thin the markets are basically flat.
The news from Europe is mixed, so perhaps investors are taking the opportunity to extend the holidays until the market finds a direction.
I had an interesting experience when I went to cash in some savings bonds I’ve been dragging around for years. These are bonds I bought back in 1995, some of them must have been later because they all weren’t face value yet. It made an interesting comparison to other investments.
If you put $400 into savings bonds, which would buy you eight Series EE $100 bonds and $400 into gold in December of 1995, here’s how it would break down today. Your bonds would have doubled to the face value after hitting the limit of 17 years. So your return on the bonds was $400.
The $400 in gold did not start out doing well, in fact the price of gold went down for the next four years. Those were the Clinton years when we were paying down our national debt and running a budget surplus, so the price of gold makes sense in that context. Your 1995 gold purchase was actually underwater until 2003, eight years later just to break even.
But if you stuck it out the 17 years until January of 2012, missing the peak in the fall of 2011, you still sold your 1995 gold for $1,762.00, a return of $1,362.00, over three times what you made off the same amount of money in savings bonds.
In 1995 the S&P 500 was around 615; today you’d be looking at 1,315, not counting the boost from dividends along the way.
As you can see the wise investment choice is diversification but that mix should include at least some gold and silver.