Volatility: The Other Side of Gold
Although the year is far from over, it’s been a rough period for gold enthusiasts. A sharp sell-off beginning in mid-April sent bullion prices down to $1,192 on June 28th. Since then Gold prices bounced back to $1,309 but the price remains down 22.72% for the year to date and 31% below the peak of $1,895 reached in early September 2011. For the 10-year period ending July 31, 2013, gold enthusiasts have a more positive story to tell: The annualized return for gold spot prices was 13.99%, compared to annualized total returns of 7.64% for the S&P 500 Index, 7.97% for the MSCI EAFE Index, 13.10% for the MSCI Emerging Markets Index, and 2.47% for the S&P Goldman Sachs Commodity Index.
Gold in Your Portfolio
The role of gold in a portfolio has provoked vigorous debate in the investment community, with thoughtful, articulate, and successful investors lining up on both sides of the issue. Although the debate may never be resolved, one of the most interesting arguments, in support of gold ownership, is the claim that gold is under-owned in investor portfolios and that a small shift in investors’ allocation strategy could lead to a significant rise in the real price.
The Pros and Cons
Should gold be a part of my portfolio? Click on this link for a quick and interesting read, published in the New York Times, on what Gregory Mankiw, Professor of Economics at Harvard, told his friend when prompted with this question.