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

All That Glitters Is Not Profitable, So Stop Buying Gold Already

NEW YORK (TheStreet) -- As spot gold trades at $1295 and the SPDR Gold Shares Trust (GLD) trades at $125, we once again hear all the experts tell us how smart it is to have gold in our portfolio. May I remind you that they were also saying these things when it was trading at $1900? This is more than 30% off the highs and it happened amid the biggest quantitative easing we've ever seen.

We'll continue to see the sale of "double golden eagle" gold coins on television ads. The people that sell those coins at that mark-up play on the fears of Americans across the U.S. and should be jailed, but that's a different article all together. "We've just found a secret stash of 3,000 of them locked untouched in a basement, and you can buy 300 of them if you call now!" I believe it is usually followed up with a commercial selling ocean front property in Arizona, not sure. Ah, but what a beach!

As we hear statements that inflation is going to drive up the price of gold, we have to remember what's gotten us to this point. Gold was in the $800 area before the financial crisis. Fears of inflation drove investors across the globe to buy the bullion and ETFs that represent it. Now, we haven't seen inflation on the scale it was predicted. In fact, we battled deflation for the first few years of the recovery. Countries that purchased the shiny metal aren't so eager to invest in something that has lost 30% during the biggest quantitative easing ever put into effect.

The U.S. dollar has actually been in a pretty strong uptrend for the last two months. As we complete the exit of the Fed's quantitative easing in October, we still haven't touched 2% inflation. The people that have been wrong all along will point out the costs of very specific items like the price of hogs. The truth is there will be specific items that get inflated based on supply and demand issues forever... The price of hogs does not make inflation.

Within the next six months, it is quite likely that the Fed will allow interest rates higher. What other excuse for gold is there anymore? Russia? Global turmoil has turned investors towards trading the VIX and associated ETFs lately. Before these avenues, gold would have popped on news of Ukraine, Israel or Iraq. That's just not the case anymore.

Frankly, there's no reason to invest in it anymore. It has little to no use. It doesn't react to global turmoil, and it has fallen 30% compared with the U.S. printed money. Given all those circumstances we've seen, you should have been able to expect gold around $2,000. It's a stay away investment. Dare we say it? Fiat currency is more reliable than gold?

At the time of publication the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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 $94.00 -0.02%
FB $101.52 -2.50%
GOOG $678.14 -0.79%
TSLA $155.08 -4.60%
YHOO $27.36 -2.20%


Chart of I:DJI
DOW 15,899.39 -305.58 -1.89%
S&P 500 1,846.62 -33.43 -1.78%
NASDAQ 4,274.1250 -89.0190 -2.04%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs