Ever since gold exchange traded funds (ETFs) came into existence, investors have discussed the benefits of investing in this area. Gold ETFs have been known as safer investments because 1) as the dollar declines, they tend to do well, and 2) they generally ride out well during volatile markets. Another obvious benefit of gold ETFs is that they provide another way to diversify investors’ portfolios. However, Roger Nusbaum for TheStreet.com says gold’s role as a safe-haven might be changing.
Now that most investors know about these core benefits of gold, they’ve jumped on board, driving its price up, Nusbaum argues. This could explain why it hasn’t offered much protection during the recent market declines. For example, when the market fell 5% in the first quarter of this year, streetTracks Gold Shares (GLD) dropped 7.5%. Granted, gold is holding up better than most stocks during the current market volatility, having only lost 4% since July 19, but it’s still not as good as it could be. Currently, GLD and the other gold ETFs are pretty much flat since the most recent market low on Aug. 15th.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.