Gold Bugs go bust: Gold, Long a Secure Investment, Loses Its Luster
Gold, Long a Secure Investment, Loses Its Luster
By NATHANIEL POPPER
Published: April 10, 2013
Below the streets of Lower Manhattan, in the vault of the Federal Reserve Bank of New York, the world’s largest trove of gold — half a million bars — has lost about $75 billion of its value. In Fort Knox, Ky., at the United States Bullion Depository, the damage totals $50 billion.
And in Pocatello, Idaho, the tiny golden treasure of Jon Norstog has dwindled, too. A $29,000 investment that Mr. Norstog made in 2011 is now worth about $17,000, a loss of 42 percent.
“I thought if worst came to worst and the government brought down the world economy, I would still have something that was worth something,” Mr. Norstog, 67, says of his foray into gold.
Gold, pride of Croesus and store of wealth since time immemorial, has turned out to be a very bad investment of late. A mere two years after its price raced to a nominal high, gold is sinking — fast. Its price has fallen 17 percent since late 2011. Wednesday was another bad day for gold: the price of bullion dropped $28 to $1,558 an ounce.
It is a remarkable turnabout for an investment that many have long regarded as one of the safest of all. The decline has been so swift that some Wall Street analysts are declaring the end of a golden age of gold. The stakes are high: the last time the metal went through a patch like this, in the 1980s, its price took 30 years to recover.
What went wrong? The answer, in part, lies in what went right. Analysts say gold is losing its allure after an astonishing 650 percent rally from August 1999 to August 2011. Fast-money hedge fund managers and ordinary savers alike flocked to gold, that haven of havens, when the world economy teetered on the brink in 2009. Now, the worst of the Great Recession has passed. Things are looking up for the economy and, as a result, down for gold. On top of that, concern that the loose monetary policy at Federal Reserve might set off inflation — a prospect that drove investors to gold — have so far proved to be unfounded.
And so Wall Street is growing increasingly bearish on gold, an investment that banks and others had deftly marketed to the masses only a few years ago.
Can all those fooled old people sue Glenn Beck or Ron Paul (actually you can’t sue him as a member of Congress) for the money they lost buying overpriced gold based on their nutter rantings?