Over the past four years, holding gold has been a wise investment. From January 2020 to the end of February 2024, the price of gold rose 33 percent, from $1,527 to $2,027. It was good to hold gold. It was also rewarding to have been invested in the AI speculation. Assuming the AI craze as captured by the performance of the popularized term Magnificent Seven, the stocks of Amazon, Meta, Apple, Alphabet, Nvidia, Microsoft, and Tesla are up between 84 percent (Amazon) and 1,224 percent (Nvidia) over the timeframe. The amazing runup in both gold and technology stocks presents a question for every investor - Are we close to the end of a boom in the AI investing hype? And, if so, what does that mean for gold investors? One way to answer that is to look at how gold did over the last tech-fueled boom - the late 1990s (commonly known as the dotcom boom and bust).
The Price of Gold Over the 1990s
Shown in the following figure is the price of a troy ounce of gold in dollars over the 1990s. The price of gold went from $399 per troy ounce to $290 per troy ounce at the end of the decade.
Interestingly, the price of gold declined over the decade. Of course, gold did go on a run to end the decade as investors’ concerns over the Y2K bug drove investor demand into the safe haven asset.
Perhaps more interestingly is how the price of gold performed in the decade after the dotcom bust. That is shown in the second figure that follows.
After decade that followed the dotcom bust, the 2000s, the rise in the price of gold was rewarding to every gold investor. Gold began the decade at $282 per troy ounce. At the end of the decade, gold stood at $1,406. For the individual investor, that equated to a return of 399 percent. The period after the dotcom bust was a wonderful period for holders of gold.
What does this mean for the price of gold over the rest of the decade?
What does all this mean for the remaining six years of the 2020s? Simply put, if the 2000s represent a reasonable comparison for what the remaining years of the 2020s will look like, then now is a good time to get in on gold. Gold investors could be well rewarded in the coming years.
Summing Up
Are we at an inflection point for gold? The answer, of course, is maybe. If the aftermath of the dotcom bust is indicative of where the price of gold may be heading for the remaining years of the 2020s, the 2020s will be a decade to remember for the world’s most famous precious metal.
