During the global economic expansion of the mid-2000s, precious metals (such as gold), oil, and other commodities increased significantly in value. The surge in oil prices certainly garnered plenty of headlines when it surged past $100 per barrel. So, too, did the price of gold as it surged past $1,000 per ounce in 2008, setting a new all-time high. These prices represented tremendous increases over the past decade with the price of oil having increased more than 600 percent (from less than $20 per barrel) and gold more than tripling in value (from less than $300 per ounce).
However, despite these seemingly major moves, when considering the increases in the cost of living, at $100-plus per barrel, oil prices were just reaching the levels attained in late 1979! And even with gold hitting about $1,500 per ounce in 2011 as this book went to press, it was still far from the inflation-adjusted levels it reached nearly three decades earlier. To reach those levels, gold would have to rise to more than $2,000 an ounce!
So although the price increases in gold andoil (as well as some other commodities) were dramatic during the past decade, over the past 30 years, oil and gold increased in value less than the overall low rate of U.S. inflation. So one would hardly have gotten rich investing in oil and gold over the long-term — rather it would have been more like treading water.
I’d like to make one final and important point here: Over the long-term, investing in a stock mutual fund that focuses on companies involved with precious metals has provided far superior returns compared with investing in gold, silver, or other commodities directly.