If I were a B-school prof I would try to get a curve named after me (the sure route to fame in that field). B-school theory on what a stock is priced at is just plain wrong - it is NOT the discounted NPV of all future cash flows from the stock, but a bet based on a guess as to what others thing others will be willing to pay in the future. Like Valentine said it trading places, "I get it, you guys are bookies".
What few bother noticing, and no gold seller (that I have seen yet) is forthcoming enough to admit, is that PMs are treated as "collectibles". This means that all sales, no matter how long you held the asset, are taxed as ordinary income, not capital gains.
And the meaningful comparison to the four year return is not against the interest rate (beta=0), but against the S&P 500 (beta=dang close to 1).
The S&P over 4 years:
2016 - 9.54%
2017 - 19.42%
2018 - (6.24)%
2019 - 28.88%
For a gain of 58% for the S&P 500
Going from $1100->$1600 is a gain of 45% for Gold (using the previous poster's gold prices)
Plus, your S&P 500 gain would be taxed as capital gains if held over a year (0% up to about $39K total annual income;15% up to about 434K in total annual income; 20% above that)
Gold does have some advantages:
- It is a disaster hedge as the backing of gold is as good as gold
- It is undocumented and not under government supervision (though you will get lower prices, and become a criminal if you try to liquidate a large amount in small quantities to every gold buyer in town)
- It is harder for Medicare/Nursing homes to find. (Keep in mind the earlier caveat about being a criminal, though dementia may make it hard to remember you have it, so be sure to store it where your kids will find it and not some future homeowner remodeling)
- Transferring to offspring is as easy as "Here, I have something for you", not IRS forms if above $15K (standard caveat incorporated by reference)
But, from an investment point of view, it is not as simple as claiming gold is a super-performer. That is not always the case