The price of gold has risen every single year for almost 12 years and yet most investors still don’t own it.
Since it made its low of $252 an ounce back in July 1999 gold has appreciated 492% whereas the DOW is up just 6.5% and the FTSE is down 13%.
Incredibly even after such an outperformance the percentage of gold held by investors and fund managers is extremely low, especially when compared to the peaks and panics of the past.
In the 1930’s gold made up around 20% of investment portfolios worldwide. In the 1980’s when gold spiked to $850 an ounce it represented 26% of assets. Today the percentage of gold held by investors in their portfolios is just 0.8%.
To get from today’s 0.8% to just 2% would require 85,000 tonnes of new gold to become available. Given that it would take 34 years for that gold to come from mine production it’s going to have to come from the hands of existing holders of gold who have only been net sellers twice in history.
Clearly then we are going to need much higher prices if this wealth transfer is to take place.