Low bank rates have led many investors to search desperately for alternatives. This has been credited with supporting the markets for stocks, real estate and commodities. Lately, though, a couple of high-profile commodities have shown a change in their behavior that investors may want to note.
After a 10-year bull market, gold is going through a severe correction. Meanwhile, oil prices over the past year have done something fairly unusual for them: They've been reasonably stable.
Should either of these developments prompt a reconsideration of oil or gold in your portfolio? There are a few things you should evaluate first.
Gold falls from grace -- somewhat
Gold has enjoyed an epic run in recent years, rising by about 570 percent over 10 years before peaking in the summer of 2011. Gold prices then bounced around for a while, but over the past seven months they have pretty much gone straight down, recently dropping below the $1,400-per-ounce mark. This puts gold down about 25 percent from its peak.Does this drop in prices make it a good time to get in? It's all a matter of perspective. You can look at the recent decline as an opportunity, or you can take a longer-term view and see that gold is still up by nearly 300 percent over the past decade. Whether you view the current price as cheap or expensive really depends on your time-frame, because the market demand for gold is so prone to speculation that it is difficult to come up with an objective valuation methodology. One thing you can say about gold prices: They certainly behave like no other investment. If nothing else, that at least gives gold a modest amount of appeal as a diversification element.