Everywhere most people look, it seems that assets are overpriced. Stocks hit a record high earlier this year, real estate is expensive again, and bonds continue to offer low yields. With the recent Fed rate cut, the money market may face another decade of negative real returns. Valuation is a relative concept, so something must be undervalued in comparison to all these other assets. There is a strong historical case that gold and other precious metals are undervalued.

Stocks are still the most expensive asset class after the Dow Jones shot up about 300% during the last decade. Even after last year’s correction, prices remain high by historical standards. Consider the P/E 10 ratio, a popular method of stock valuation championed by Nobel Prize-winning economist Robert Shiller. The P/E 10 for the S&P 500 has been hovering around 30 for the last couple of years. We’ve seen this movie before. The first time the P/E 10 hit 30 was in 1929, while the Dot-Com Bubble provided a second showing. 1929 was right before the Great Depression, the perfect time to buy gold. Those who bought gold instead of tech stocks between 1998 and 2002 also did very well over the next decade.

Real estate prices took longer to recover, but Main Street is now nearly as overpriced as Wall Street. The median home price in America reached a peak of $257,000 in 2007 before plummeting to $208,000 in 2009. For years, home prices languished as stocks recovered. Real estate was a real bargain and a real asset that could compete with gold. That opportunity has passed. The median home price in 2019 is around $320,000, far above the old highs. At least there was a chance to profit from real estate, which is more than can be said for bonds.

Investment-grade bonds offering decent yields are nothing more than a nostalgic memory, like floppy disks and cassette tapes. Back in the 80s, bonds offered very respectable returns that retirees could count on. In early August, 30-year Treasury yields dropped below 2.2% and approached record lows. That is barely enough to keep up with inflation and not worth the risk. To even get close to reasonable expected returns, investors must add precious metals to their bond portfolios.

Gold and silver are actually less expensive than they were in 2011, while most other asset prices are up. Trends often end with decades, so the next ten years will probably look more like 2000-2009 than 2010-2019. The Fed’s July interest rate cut may mark the beginning of a new era. The “strong dollar” period seems to be over, and the gold price recently went above $1,500 for the first time since 2013. Additional rate cuts could boost markets, but precious metals are the most likely winners. Stocks, bonds, and even real estate are now overpriced, so cheap money can do little more than cover up losses. When everything looks overvalued, it is probably because gold is undervalued.