Inflation Protection: Government vs. Gold

Jun.29.08 | About: SPDR Gold (GLD)

Many of the not-so-bright bulbs in the investment community seem to recommend securing "inflation protection" from the government rather than from Mother Nature (see Money Magazine recommends commodities (kind of)). Here's a comparison of the two since TIPS (Treasury Inflation Protected Securities) became available in 1997.

Click to enlargeThe chart above uses the Lipper TIPS fund average from the Allianz Global website as a proxy for a TIPS investment. You can also get information on the Pimco Real Return fund (MUTF:PRTNX) at the same location.

If you begin the comparison back in 2002 when gold should have come onto the radar screens of any open-minded investor who was paying attention, the difference in returns is even more dramatic.
Click to enlargeSo much for gold not paying any dividends.

Full Disclosure: Long gold, no position in TIPS at time of writing.