When Donald Trump accepts gold bullion as a security deposit for one of his buildings, is it time to bail out of the yellow metal as it heads for its worst month in three years?
However you interpret gold’s recent slide — or the Trump factor –either the pale metal has lost its luster for now or large investors have ratcheted down their fear levels. Either way, there’s going to be more downside volatility in that market.
As I’ve written in the past, I don’t regard gold as a real investment. It doesn’t pay dividends, has no intrinsic value and is no replacement for bread and water if catastrophe strikes. Gold may be due for a huge correction. The raising of exchange margin requirements for gold traders and the possibility of the Eurozone debt woes being addressed led to a huge sell-off of gold in the past few weeks.
After making a run at $1,900 an ounce, the metal fell to around $1,600. It may be that large investors actually fled gold to be in cash again, thinking that either gold’s run was over or they needed to be in something safer.
Yet if you believed that gold is a proxy for extreme uncertainty — as millions have — when would you begin to shift into less-volatile vehicles such as government or inflation-protected bonds?