This Day On The Street
Continue to site
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

Why Ben Bernanke's QE Is No Stimulus for Gold

Today, gold is down 31.5% from its 2011 peak as of July 17, according to the St. Louis Fed -- by definition, a bear market, illustrating that not only is gold not an inflation hedge, it's also not a stable store of value. Neither is it an effective hedge against equity market volatility -- just consider the 2000s: Gold rose alongside stocks from late 2002 through 2007. When the financial panic hit, gold fell, as did stocks. There was divergence briefly (from roughly November 2008 to February 2009), but even when gold has risen and stocks fallen, equities have gained more value over the years than gold.

So why do some investors insist on gilding their portfolios?

Most likely because myths persist despite gold's historical performance. Since the end of post-Bretton Woods controls allowed gold to begin trading freely in 1973, the shiny metal has traded like any other commodity, and it's one with very few physical demand drivers. It trades largely on sentiment, which explains its historical volatility.

But investors haven't historically been compensated for this volatility. According to finance theory, volatile assets like gold should have potential for equally high returns to make them worth the risk. Yet, over time, gold has underperformed stocks.

In our view, investors seeking long-term returns should leave the golden nest egg to the golden goose. Other investments seem much more attractive, in our view.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
2 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
Only $9.95
14-Days Free
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
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.02 0.00%
FB $100.67 -8.90%
GOOG $683.57 0.00%
TSLA $154.71 -12.00%
YHOO $27.97 0.00%


Chart of I:DJI
DOW 16,204.97 -211.61 -1.29%
S&P 500 1,880.05 -35.40 -1.85%
NASDAQ 4,363.1440 -146.4150 -3.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs