I thought I'd expand on Jack's original analysis in some more detail. Jack calculated the return on the investment by putting in $10,000 at the beginning of each decade. I went through and dollar-cost averaged on a monthly basis. I'm not trying to show whether or not gold is currently overvalued. Just showing how it's "performed" as an investment since January, 1975 (roughly 4 years after any kind of gold backing was removed from the dollar). I thought it was appropriate to start in 1975 because by that time the impact of a former gold-dollar tie was completely unwound. My methodology was as follows:

I assumed that an "investor" bought $100 worth of gold at the closing price (US dollars) on the first day of each month since January 1975. In other words, I dollar-cost averaged $100 per month, regardless of gold or stock prices, on the first day of the month for 35 years. I did the same thing for the DOW, assuming our hypothetical "investor" bought 100 shares of the DOW at the closing price on the first day of each month since 1975. The only thing that's unrealistic about this is that it's likley that a real investor would increase the amount of his/her investment, in dollars, over time. It seems to me that since the past 10 years have obviously favored gold, that would benefit our gold investor, not our DOW investor.

If our investors both started on January 1, 1975, our investors would have accumulated the following number of dollars invested, ounces (gold) or shares (DOW), and total worth (price of ounces/shares in US dollars) by each of the following dates:

**By January 1, 1980:**The gold investor has invested $6,000, owns 35.85 oz of gold, and his/her gold is worth $20,058. The DOW investor also invested $6k, owns 7.01 shares of the DOW, but his/her shares are only worth $5,875.73. The DOW investors actually lost $124.27 in this 5 year period. Most people know this was a very good period for gold, so this should be no surprise.

**By January 1, 1985:**By this time the 1980 gold bubble had deflated. The investors had both invested $12,000. The gold investor owned 49.92 oz of gold. His/her gold was worth $15,249.10. The DOW investor owned 13.07 shares that were worth a total of $15,830.86. So from 1975 to 1985, the investor that dollar-cost averaged into the DOW had accumulated about $580 more than the gold investor

**By January 1, 1990:**We know the mid to late 80s included a very good stock market run, so it should be of no surprise that by 1990, the DOW investor had outperformed the gold investor with their $18,000 of investments to date. The gold investor has 65.69 oz of gold worth $26,210.54. The DOW investor has 16.26 shares worth $44,763.46. From 1975 to 1990, the DOW investor has increased his/her wealth 1.7 times more than the gold bug.

**By January 1, 2000:**This period includes the dot com tech bubble and a very depressed period for gold. The gold investor has invested $30,000 in 100.32 shares of gold worth a total of $28,293.95. The DOW investor has turned his $30,000 into 19.06 shares of the DOW worth $219,177.73. Very impressive for the DOW.

**By October 1, 2010:**This is essentially where we are today, after 35 years of dollar-cost averaging. The gold investor has accumulated 129.2 oz of gold at $1316.25. His total amount invested would have been $43,000 His gold would be worth a total of $170,054. Our DOW investor would have also invested $43,000, and his 20.32 accumulated shares would be worth a total of $160, 528.94. Gold wins for the long term investor!

What if you haven't been investing since 1975? Next I'll compare how our two hypothetical investors would have done through October 1, 2010, if they'd started investing at various starting points.

**Started investing on January 1, 1980:**Let's say you got in right about the peak of the gold bubble in 1980 and kept on dollar-costing up to the present. The gold investor would have 93.35 shares of gold worth a total of $122, 866.94. The DOW investor would have 13.31 shares worth a total of $143, 664.47. The DOW investor wins here, which isn't surprising since the gold but started buying in at the peak and the stock investor got in when stocks had experienced a major downturn in the mid-late 1970s.

**Started investing on January 1, 1985:**Gold Guru has 79.28 ounces worth a total of $104, 353.43. Dr. DOW has 7.25 ounces worth $78,268.15. Both did well with their $31,000 of investments, but Gold Guru is much better off.

**Started investing on January 1, 1995:**Gold Guru owns 47.09 ounces worth $61,983.94. Dr. DOW owns 2.17 shares worth only $23,451.13.

**Started investing on January 1, 2000:**The gold investor owns 28.88 ounces worth $38,014.23. The DOW investor owns 1.26 shares worth $13,643.54 - nearly 3 times less than the gold investor.

**Conclusions:**Pretty much the same as Jack. Unless you started buying one or the other at a major peak, it's hard to say which has been better. But for the last 35 years you can say gold has outperformed the DOW index. I have a coworker with an MBA that was just regurgitating something one of his elite profs said...basically that over any prolonged period, stocks have outperformed any other investment. This guy also said commodities in general were poor long term investments. My take is any recognized investment is a good one if you buy and sell at the right time. If you're not a trader but invest for the long haul, just don't sell at a low if you don't have to, and odds are it will come back. Of course, like many on this board, my thoughts about the viability of our current economy and currency make this a bit more complicated. The most bitter thing for me? I started investing in 2001, and thought it was great that stocks were "on sale" with the recession and 911. I knew nothing of gold. Somebody tipped me off to gold investing in 2003, but I didn' listen. Wow, if I had even invested just 20% of my saving in gold I'd be sitting very well today. Hindsight is always so painfully clear, isn't it?

My gold price info came from

www.kitco.com, and the DOW prices are widely available. If anybody is really interested in this analysis, let me know and I'll email you my Excel spreadsheet so you can review or manipulate the data further.