Gold Is Down Again Today

After taking a bath on Friday, gold is down again today.

Gold for February delivery slipped $26, or 2.22%, to $1,143.50 a troy ounce early Monday. Gold prices fell sharply Friday after after a much better-than-expected jobs report from the government showed employers trimming a mere 11,000 jobs in November as the unemployment rate ticked down to 10% from 10.2% in the prior month.
“We’ve had a substantial turn in the dollar,” said Mark Hansen, director of trading at CPM Group. “People are taking a second look at their commodity exposure, especially precious metals, which have been investor favorites in the past couple of month.”
Gold prices were pressured by a stronger dollar, as the greenback hit a five-week high against a basket of currencies Monday and also rose against the euro.

We’ve become very used to a script lately—dollar down, gold and stocks up. Could that be coming to an end?
Bloomberg notes that since 1980, gold has been an awful investment:

Gold’s best year in three decades has yet to match the returns of an interest-bearing checking account for anyone who bought the most malleable of metals coveted for at least 5,000 years during the last peak in January, 1980.
Investors who paid $850 an ounce back then earned 44 percent as gold reached a record $1,226.56 on Dec. 3 in London. The Standard & Poor’s 500 stock index produced a 22-fold return with dividends reinvested, Treasuries rose 11-fold and cash in the average U.S. checking account rose at least 92 percent. On an inflation-adjusted basis, gold investors are still 79 percent away from getting their money back.
“You give up a lot of return for the privilege of sleeping well at night,” said James Paulsen, who oversees about $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. “If the world falls into an abyss, gold could be a store of value. There is some merit in that, but you can end up holding too much gold waiting for the world to end. From my experience, the world has not ended yet.”

Posted by on December 7th, 2009 at 9:05 am


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