This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Making Sense of Gold's Fall From Grace

NEW YORK (TheStreet) -- Gold's stunning 9% drop on Monday has many declaring that the yellow metal's 12-year bull run is officially over. In the past year, the price has fallen nearly 16%, and now stands at the lowest level since February 2011. Technicians will tell you that the gold price chart looks downright ugly, and that there may be further damage done in the near future. That may well be true, but my perspective on gold is a bit different.

First of all, gold is not an investment, in my view. It's insurance against uncertainty, a hedge against inflation and a store of value. In times when there is little uncertainty, and inflation is not a threat, you would expect the price to be relatively low as it was for much of the late 1990s.

As an investor, you'd hope for those conditions, because all in all, it would signal economic stability, rising markets, and solid performance from your portfolio. With gold representing a small piece of that pie, investors would happily accept falling gold prices in exchange for growth in the other asset classes in their portfolios.

GLD ChartGLD data by YCharts

However, I don't believe that we are living in times of great certainty. There are many clouds on the horizon, both economic and other world issues. I also don't believe that inflation is at bay. Despite what the CPI tells us, as consumers, we are well aware that we are paying more for many things needed to sustain our lives.

Perhaps via mortgage refinancing we've been able to cut our housing costs, but rates won't stay this low, artificially I might add, forever. It's difficult to imagine a scenario in which interest rates don't explode at some point in the next several years. The Fed has been pumping and printing for years, deficits are exploding, and one of the few ways out of this mess will be via inflation.


Stock quotes in this article: GLD 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 +2.54 0.14%
NASDAQ 4,095.5160 +9.2910 0.23%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs