Gold has been a disappointment of late. Perhaps too much was expected from the precious metal. It is up 11 consecutive years, averaging double-digit gains per year. Recent performance, however, has not been good. Gold touched $1,900 in the third quarter of 2011 and currently sells below $1600. Kitco.com reports that gold is up .3% at the close on July 12 from where it was exactly one year ago. It is possible that the calendar year results will not be up for 2012. That would represent the first down year in the last 12.
Is it OK for gold to go down? Those invested in gold would prefer it doesn’t, but a rational answer must be “Yes.” Trees don’t grow to the sky and few assets monotonically increase in value for lengthy periods. Gold is no different. It has had a remarkable 11-year run. But is this run over? Is gold just another bubble? We have seen several bubbles and will see more before this economic disaster fully plays out.
Human nature is spoiled by easy success in investing or other things in life. Success breeds confidence and higher expectations, often unwarranted. Men tend to believe that things in motion will continue in the same direction. No law, rule or guarantee exists to support such beliefs. That is not the way the world actually works, despite our brain’s tendency to see things that way.
Many gold investors are disappointed because their expectations have not been met recently. Latecomers to the commodity may have lost money. Many are wondering whether gold still a place to be. Is the 11 year feast that began with gold less than $300 over? Is it to be followed by 11 years of famine, perhaps returning to where it began?
These are valid questions and concerns. Everyone