The thought running through many investors' minds goes something like this: "OK… all this crazed bailout spending by world governments has me worried about holding risky paper currencies. But should I flee government paper for gold… or for stocks?"
As our chart of the week shows, there hasn't been much difference lately. Below is a chart comparing the past year's gain in the price of gold (black line) versus the gain in stocks (S&P 500 index, blue line). As you can see, these two assets have moved almost in lockstep in the past 12 months… although gold has nudged higher in the past few weeks.
Remember… this is just a one-year snapshot. Gold has trounced stocks over the past eight years (gold has quadrupled, stocks are flat). But in a flight from paper currencies, owning both stocks and gold is the safe, diversified way to go.
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