29 Aug 2013 Torray Fund - July 8 Letter to Shareholder ( Portfolio )
...Gold, very much in the news in recent years, is a prime example. Thirty-three-and-a-half years ago — 1980 — it peaked in a speculative surge at $850 an ounce; a few years later it collapsed to about $300, where it remained for close to 25 years before a recovery began in 2004. Then, sparked by the market crash and financial panic of 2008-’09, it skyrocketed, eventually reaching $1,900 earlier this year. It has since dropped about 35% to a range of $1,200-$1,300. The bottom line is that after 33 1/2 years of ups and downs, the metal advanced only $400. The real story, though, is that over nearly three-and-a-half decades, adjusted for inflation, this reputed hedge of all hedges against inflation lost more than half of its value. By comparison, stocks, over the same period, earned a nominal 11.4%, 8.1% net of inflation, a gain of 1300%. None of this is to say gold can’t go up. Some followers predict it’s headed for $2,000-$3,000, and a recent New York Times advertisement for the metal forecasts $5,000. We have no opinion. The reality is that beyond jewelry, gold, which earns nothing and pays no dividends, depends entirely for its value on the whims of investors — not a comforting thought...