Gold Loses Its Value as Selloff Protection
There's been a lot of ink spilled in the last few years (and I have contributed some of that ink) about how investors can use commodities to diversify their stock portfolios because there's a low correlation between the two asset classes.
The easiest and most obvious commodity to capture this effect is gold, but lately I have been starting to wonder if gold has a tighter correlation to stocks than it used to because it has become so popular. Author Nassim Teleb had a great comment on the Wealth Track program a few weeks ago when he said that diversification used to work when no one knew about diversification. A lot of people know about gold -- maybe too many people -- and that may be why it has not offered much protection during the last three biggish stock market dips. During the selloff that started in May of 2006, the S&P 500 dropped roughly 5% in a month. Gold, as measured by the StreetTRACKs Gold Trust (GLD Quote), fell 17% over the same period. Again in the first quarter of this year, when the S&P 500 fell 5%, GLD dropped 7.5%.| Where does gold fit into your portfolio? Answer Here |
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| Dow Jones | S&P 500 | NASDAQ | 10-Year Note | |
|---|---|---|---|---|
| 10,023.42 | 1,069.30 | 2,112.44 | 35.03 |
Oil *
76.05
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UP
17.46
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UP
2.67
|
UP
7.12
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DOWN
0.30
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10 Yr
3.50%
SPDR Gold
107.43
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|
+0.17%
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+0.25%
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+0.34%
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-0.85%
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Data delayed 20 minutes |














