Gold's Historic 2008 Journey to TARP from Stearns

NEW YORK (TheStreet) -- It was a bizarre scenario in which people opted not to take gold.

President George W. Bush on Oct. 3, 2008 was signing into law the unprecedented Troubled Asset Relief Program as the global financial system crumbled amid an investor dash to sell assets, and despite gold's appeal as an alternative currency, it was clear that the liquid asset humans wanted to hold was the U.S. dollar.

"As bizarre as it was, you would think that would be the time you would need to buy gold [but], the immediate dash for cash was really just to get U.S. dollars," says Graham Leighton, a precious metals trader at Marex Spectron.

From a 2008 high of $1,023.29 an ounce the day after JPMorgan (JPM) acquired investment bank Bear Stearns with the help of a huge loan from the Federal Reserve Bank of New York, to a year low on Oct. 24 of $695.40, gold holders across that timespan saw the precious metal lose 32% of its value.

To put it into perspective, 2013's volatile and historic gold trade -- the yellow metal plummeted 13% in just two consecutive trading days in April -- witnessed a 29% decline to its year-to-to-date bottom from its high.

Bear Stearns' March 16 fire sale, which injected fear in the markets, triggered gold's first-ever pop above $1,000 an ounce (not adjusted for inflation). It was a classic fear trade: Investors view gold, when part of a portfolio, as an asset hedge against crises or inflation, among a few other characteristics. The logic among those who bet on gold during crises is that if all else fails -- nuclear fallout, collapse of financial systems and other doomsday scenarios -- the precious metal will, as it has for millennia, retain its appeal as a store of value.

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