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Fool's Gold (Part 2)

In part 1 of this article, I laid out some common sense explanations why gold is best utilized for short-term trading. Furthermore, I emphasized that gold rarely provides a good hedge against inflation. When it does, it’s most often a short-term phenomenon. In Part 2 of this series I’ll demonstrate this.

Let’s begin by looking at a gold price chart from 1975 to 2009. Note that gold prices in this chart have NOT been adjusted for inflation.

If you bought gold any time between 1980 and 1998 and held it, you lost out—UNLESS you made a short-term trade, or exited after a couple of years.

Depending on when you bought it, you had to wait until anywhere from between 2004 and 2008 in order to make money (these periods have been roughly estimated, but you can get the general idea by studying the price chart below).

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