This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

The Trouble With Investing In Gold





The price of gold took a precipitous drop in mid-April, dropping by more than $200 in less than a week. With gold prices already down this year, this sudden steepening of their dive gave investors a new wild card to consider.

While many were clamoring to join the rush to the exit from gold, others will view this drop in prices as a buying opportunity. Still others will quietly congratulate themselves for having stayed on the sidelines throughout. Bank rates may not be very exciting right now, but when you see the value of an investment take a double-digit percentage drop in a matter of a few days, it is a reminder that excitement can cut both ways.

This latest development is just the latest twist in a history of gold that is often as enigmatic as it is dramatic. Gold investments are often touted as a type of hedge or safe haven, but prices are so subject to speculation that gold has a history of boom-and-bust cycles.

Gold's boom-and-bust history

The first major run in the price of gold took place from 1970 to 1974. Over those four years, the price of an ounce of gold jumped from $38.90 to $183.77, an increase of 372.42 percent. This was followed by a 27.21 percent decline over the next two years. Then, from 1976 to 1980, gold rose from $133.77 to $594.90, an increase of 344.72 percent. Predictably, this was then followed by a 48.23 percent decline over the subsequent four years.

Then gold did something different. It essentially went sideways from 1984 to 2001, with a series of relatively small increases and decreases more or less cancelling each other out, leaving gold with an overall decline of 10.23 percent to show for that 17-year period. More than that decline, it is having dead money for such an extended period of time that would be most damaging for investors.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

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

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
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.
Submit an article to us!
SYM TRADE IT LAST %CHG

Markets

DOW 17,925.07 -210.65 -1.16%
S&P 500 2,075.34 -25.70 -1.22%
NASDAQ 4,934.0880 -48.7210 -0.98%

Partners Compare Online Brokers

Free Reports

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