Comments on: Why the Price of Gold is Sinking Fast

By: Jeremy

Jeremy — Thu, 14 Oct 2010 20:32:28 +0000

If most folks only knew then what we know now about where gold was actually headed to….

By: Rick @ Morgan Silver Dollars for Sale

Rick @ Morgan Silver Dollars for Sale — Fri, 17 Jul 2009 02:07:50 +0000

I enjoyed your post, very informative. I’m learning a lot from your site.

By: Why Is Gold Falling In Price | WTC Ground Zero PCGS Certified Coins

Why Is Gold Falling In Price | WTC Ground Zero PCGS Certified Coins — Sun, 02 Nov 2008 01:05:18 +0000

[...] I bought gold about 4 years ago as in my economical teachings I had always learn if the world are in a crises people will start buy gold as a safe investment. Well looking at the last month of turbulent markets all over the world gold has only gone one way and that has been down. So I wanted to find out what was different this time compared to what the books are telling us would happen when the market goes down. Well looking around on the web I found a great explanation at this blog.http://blog.adamnash.com/2008/10/24/why-the-price-of-gold-is-sinking-fast/ [...]

By: dfk

dfk — Mon, 27 Oct 2008 12:14:15 +0000

sir;

i must agree with your grandfather, yet i have diversified my now-tattered
portfolio by investing in that most melancholic of precious metals-
copper-jacketed lead. i hope that you have done the same and that we never have cause to use it.

fighting over resources has never been “my thing”, but there are a few people left for who i must still do so.

good luck to us all,
d

By: Adam Nash

Adam Nash — Mon, 27 Oct 2008 06:22:08 +0000

Bill,

I don’t disagree with you in the aggregate. I’ve never been one to allocate a large percentage of assets to gold. For the most part, a broad commodity index gives you better diversification from a portfolio analysis standpoint, and there always seem to be too many gotchas with gold.

That being said, the track record for gold collectible coins (vs. gold) is quite good. It seems that the collectible nature of the coins adds an element that is indexed to disposable income, rather than just a commodity.

Both, however, are still more correlated with stocks now than most people give credit to.

My grandfather used to say that there was no point investing in gold, because the only future where gold is worth a significant amount is a future where everything else is so bad it won’t matter.

Adam

By: Bill

Bill — Mon, 27 Oct 2008 00:55:26 +0000

Adam, one wonders why gold is such an attraction irrespective of market conditions. To put money into anything but a mattress would apply the investor has one of two goals (not mutually exclusive): to get rich or to save for a comfortable future. Unless the desire to be rich is immediate or the comfortable future starts tomorrow, why would not the prudent investor do what Graham, Dodds, or Buffett would do? Buy stock in quality companies at the cheapest possible price and hang on. If one has bought a turkey mutual fund, sell it and buy Coca Cola. Why buy gold? It has never gone anywhere. In the late 70s you could get $800 krugerands, today you can get $800 krugerands. The time value of money says you have lost your shirt. Gimme KO stock any day.

By: Gold and Silver News & Headlines for October 25 | Gold and Silver Blog

Gold and Silver News & Headlines for October 25 | Gold and Silver Blog — Sat, 25 Oct 2008 22:21:02 +0000

[...] Why the Price of Gold is Sinking Fast [...]

By: Gold and Silver Blog

Gold and Silver Blog — Sat, 25 Oct 2008 21:17:00 +0000

This is an interesting angle that I haven’t seen discussed before. I recently put together a laundry list of all the reasons people cite for gold not being higher, wish I picked this up earlier. While it’s certainly not the only thing keeping gold down, it must be a contributing factor.

By: surya

surya — Fri, 24 Oct 2008 15:56:38 +0000

agreed

i’ll blame the confusion on my poor reading comprehension skills.

By: Adam Nash

Adam Nash — Fri, 24 Oct 2008 15:50:17 +0000

I’m happy to say we agree, Surya. It’s just the mismash of linked posts that is confusing.

Normally, you wouldn’t expect gold to be counter-cyclical for this type of monetary environment. The reason its dropping is, like you said, hedge fund deleveraging.

Gold is now easily tradable as a financial asset, which is why it is so easy for so many hedge funds to own it and liquidate it quickly. Therefore, it is now heavily correlated with the rest of the financial assets because when the portfolio drops, they quickly turn to gold to raise cash.

My point above (as it was in 2007) is that the investors themselves introduce correlation. In this case, the investors are the hedge funds, and the vehicle that enabled it is the ETF.

Adam

By: surya

surya — Fri, 24 Oct 2008 15:08:32 +0000

i either disagree or don’t understand your point between the thousand articles you quoted.

i believe one of the biggest drivers behind this crazy collapse in gold is hedge fund delevering. They’re being forced to generate cash for redemptions, and gold is one of the few things that hasn’t lost like half it’s value.